When it comes to buying or selling a home, from a financial perspective, there’s more to think about than just the home price. There are a variety of fees associated with a real estate transaction—and, as a buyer or seller, it’s important to understand which of those fees you may be responsible for during the process.
Agent commission: Real estate agents make a commission off of every home sale; while commissions vary by agent, they’re often a percentage of the total sale price—a percentage that is then split between the buyer’s and seller’s agent. (So, for example, if the commission is 5 percent, 2.5 percent would go to the buyer’s agent, and 2.5 percent would go to the seller’s agent). Generally, the sellers pay this fee when it’s subtracted from the proceeds of their property sale at closing.
Closing costs: Closing costs cover a variety of fees (like loan processing, title company, and insurance fees) that are due at closing—and generally run between 2 and 7 percent of the home’s purchase price. Depending on the home sale—and the negotiating skills on either side—these costs may be covered by the buyer, the seller, or a combination of both.
So, what does this mean for you? Whether you’re buying or selling a home, if you’re not sure what fees you’re responsible for (or how much those fees will be), talk to your real estate agent. They can give you deeper insights into what fees you’ll be expected to cover—and how much you should set aside to cover those fees during your home purchase or sale.