Thinking of buying or selling? Likely you are familiar with the terms “closing costs”, “commission”, and other fees involved with the process. We wanted to break it down a little bit and help you understand who pays what in a real estate transaction.
When you decide to buy or sell a home, you will hear the phrase “closing costs” a lot. What are closing costs? They are the fees paid at the time of the real estate transaction. Typically the buyer pays for most of the title and mortgage fees, while the seller pays commission. This doesn’t ALWAYS have to be the case. The buyer and seller can specify in the contract if they agreed upon any different terms.
Once you have a closing date set, you should be able to get a pretty good estimate of what you will be expected to pay at closing. Your real estate agent or lender can provide you with this information.
Breakdown of Fees for Buyers
As stated before, there are usually more fees that come up in the buyer’s part of the closing costs. This is because most fees are related to the mortgage, which is the responsibility of the buyer. Again, buyers can ask sellers to help out with some of their expenses, and sometimes sellers will agree. If you are a buyer and considering this, keep in mind that the seller is the one paying the commission for the real estate agents. That total is probably more than what you are facing as the buyer, so be understanding if they decline.
Here is a list of fees compiled by zillow.com that the buyer would usually be responsible for paying:
- Appraisal Fee
- Origination Fee
- Prepaid Interest
- Prepaid Insurance
- Flood Certification Fee
- Tax Servicing Fee
- Credit Report Fee
- Bank Processing Fee
- Recording Fee
- Notary Fee
- Title Insurance
Go through each of the expenses with your lender so they can explain it all to you.
Asking Sellers to Help
We mentioned that buyers can ask the sellers for some help with closing costs. Since they are selling and likely making a profit on the home, they may be willing to work that out. It’s probably easier for the seller to take a little hit on their profit than it is for the buyer to come up with an extra few thousand dollars on top of what they are already paying. It never hurts to ask!
The Seller Fees
Like we said before, the sellers are responsible for paying commission. Commission is what real estate agents charge for their services. It is based on a percentage of the purchase price. That percentage varies across the board. Sellers are responsible for paying the full amount even if the buyer brings their own agent. That commission paid by the seller will be split between the listing agent and the buyer’s agent. (That’s good news for the buyer considering all of the other fees on their list!)
Let’s Talk More About This
Still have questions? We would love to sit down with you and explain in more detail how this all works. Give us a call @ 720-593-2014 to speak to one of our real estate professionals. We consider it a privilege to help you to better understand the real estate process.