By: Ashley Keihn
Writer for Shawn Smith
When it comes to purchasing or selling a home both parties will have costs to pay at closing, but who pays the commission of the real estate agent? The short answer: the seller.
They will be responsible for paying the agent, and should expect to pay between 5 and 10 percent of the sale price in closing costs depending on their location. The buyer, however, is not without fees; a buyer can expect to pay between 2 and 5 percent in closing fees but they are typically line-item expenses.
Commission Paid at Closing
One of the biggest fees associated with the closing of a sale is the commission of the real estate agent because it’s based on a percentage of the total sale price. This cost is typically paid by the seller along with any balance on their property taxes or pro-rated homeowners association dues.
Line-Item Expenses add up for Buyers
Buyers will have their own set of fees to pay at closing but they will be laid out line by line. At the beginning of the sale process the buyer receives a loan estimate form that spells out costs to expect and for what each fee is to be used. This form can be used to shop around for lenders, interest rates, and costs that best suit you s a buyer. You should go over this form thoroughly with your mortgagor and make sure that you understand each line.
Some of the costs that you can expect to pay at closing are as follows:
- Appraisal Fee
- Origination Fee
- Prepaid interest
- Prepaid insurance
- Flood certification fees
- Tax servicing fees
- Credit report fee
- Bank processing fees
- Recording and Notary Fees
- Title insurance fees
Prepare to pay property taxes or homeowners association dues that have been pro-rated at closing, especially if you are closing toward the end of tax periods or the end of the month.
Know Your Costs
The further along you get into the buying process the easier it will be to get a better idea of what you can expect your closing costs to be, and you should know by the time you get to closing, you don’t want to be blindsided. You should ask your real estate agent or mortgagor fairly early in the process what you can expect to pay and for a property and what closing costs you will see. As the closing date gets closer you’ll be able to see almost exactly what you’ll be paying.
When you are negotiating the price of the home with the seller it would be more beneficial to try to get a credit toward the overall closing costs, rather than a price reduction. Similarly, an extra one or two percent for closing costs will go a lot further than a price reduction that will in reality only take a few dollars off each month over the length of the loan.
In short, whether you’re a buyer or a seller, is to know what fees and costs you’ll be responsible for at closing and always be open to negotiating them with one another.