July 8, 2019
Who Pays the commission of the Real Estate Agent | What do Closing Costs cover?
Who Pays the commission of the Real Estate Agent? What other closing costs are there when you’re buying a home? I’m going to give you the answer to those two questions and I’m going to do that right now.
Hi everybody! My name is Ty Eden with Exit Realty Redefined. Welcome to my Youtube Channel: Dupage County Homes by Ty Eden and I am Ty Eden. Today we are going to talk about who pays for the real estate commission for the Realtors both the buyers and the seller.
If you are the home buyer guess what you’re off the hook most of the time. If its more a traditional type of sale wherein you have representing brokers on both sides then yes, the buyer will not pay the brokers fee. The seller is usually the one that’s absorbing that cost. Now there will be some instances that the seller will turn around and will try to put that cost into the buyer but that is more of an exception to the rule. You see a lot of nice things in real estate is that a lot of stuff is negotiable.
How much is the Realtor Fee? Typically, what everybody usually hear is 6% but that is up to the brokerage house on how much they want to accept on the minimal end. They will be happy to take as much of the fee from the seller as your willing to give up. I’ve heard of a fee that is upwards to 10%. Normally sellers are looking to have that fee to come down as low as they can. I would say you can probably expect the fee to be anywhere from 4% - 6% depending on where you are in the United States, how hot your market is and how hungry that real estate brokerage may be.
Now that fee Mr. seller agrees on with the selling agent, that fee doesn’t just go to that agent. This is split up in 4 ways. You cut it in half and the buying agent gets half and the selling agent gets half. That brokerage your talking to probably splits half of his half with the house which is the sponsoring broker. Costs that gets deducted out of that are costs to post the house on the internet any kind of advertising, signs, open house give away, photography and this all got deducted from that fee if the agent is successful in selling your house.
What if I hire an agent and he signed up a seller and he brings a buyer? Now what happens? Now if you as the home owner allowed the agent to play a role called dual agent then your saying its ok which can be good/bad. Now there are some states where that is actually illegal. Those are FL, CO and KS and the reason why these 3 states make this illegal is because they want the make sure it is very clear who the real estate broker and agent is representing. With dual agent situation the agent can’t negotiate with the buyer representative since he/she represents that too. It will be more likely a supervision but will get the entire fee.
So, as a seller, you might want to consider when asked because here in IL that listing agent has to ask the seller two times. First when the listing contract is entered into and then if the seller agent happens to find a buyer. The agent must reconfirm that its ok for the seller. Very superficial information can be exchanged in that agent and the buyer and the seller. It will be pretty much verification of stated facts. These are sales price, how long to close and things of that nature. Nothing about inside information or what the other side is willing to offer. Sellers be cautions when you run across something like that and buyer be educated make sure you know that your agent your dealing with doesn’t also represent the seller.
Now I said at the beginning of this video that the real estate broker expenses is absorb by the seller in most cases but buyers aren’t off the hook because there are other expenses that you have to pick up and you do this at the closing table when your ready to settle. Some of these are loan processing fee from the loan or the money you’re borrowing from. Title company fees where they issue a title insurance policy to ensure the passage of the title between the seller and the buyer. Survey cost which you probably want to make sure that you know the borders of the property your buying. Recording of the real estate deed, you want to make sure that the property is in your name so get that deed recorded in your name but buyers your going to pick that cost. Insurance, so as a home owner, all insurance policies are pre-payed and upfront for the coming year.
Here in the state of IL we have what we called transfer stamps which the buyer will have to pay for. This are any taxes that incurs at the point of you buying the property. Home owner association fees which can be pre-pay as well. Typically, you’ll see an average of 3.5% as a general rule of thumb so buyers please budget for that. You may also ask your buyer agent for a fact sheet that gives you an idea of the total costs for the closing.
The title company will issue within 24-48 hours a good faith estimates as to what your potential cost will be and that can be pretty close. Now if you’re an upside-down buyer and can’t incur these cost some seller will entertain the idea of giving a credit back to the buyer for some of those costs. Other things you can negotiate are your attorney fees, commission rates, recording costs and messenger fees. Whether your buying or selling that sales price isn’t the number you should be conscious of. You need to also be conscious of all the other costs that is going into it. Buyer and seller need to both be educated on what to expect.