Understanding Realtor Fees and Closing Costs in a Real Estate Transaction

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One of the most misunderstood concepts of buying or selling a home is the Realtor fees and Closing Costs of the transaction. Who pays the Realtor fees when you buy a house? How does a Realtor get paid? Why do closing costs seem so expensive? These are a few of the questions that this article will address. According to the 2018 National Association of REALTORS® Profile of Home Buyers and Sellers, 91% of sellers in 2018 were assisted by a Real Estate Agent when selling their home (https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics). Are you thinking of buying or selling a home and wanting to better understand the fees associated with doing so? Let’s break things down a little bit.

What Are Realtor Fees?

The Realtor Fees are calculated using a percentage of the sale price of a piece of property or home. This percentage is negotiated during the Listing Agreement Process between the Seller and the hired Brokerage/Real Estate Agent or Realtor, and can commonly be expected to be around 6%, however, it does vary. That percentage/fee is split between the Listing Agents Brokerage and the Buyers Agents Brokerage, of which the representing agents then receive their split of the commission.

How Pays the Realtor Fees When You Buy a Home or Property?

If you are a home buyer, you should be able to choose any real estate agent in the area you would like to purchase at no expense to you for their services. Why? In Georgia, as well as most of the United States, the Seller typically pays ALL of the Realtor fees in a Real Estate transaction. This is a pertinent fact for first-time buyers to learn, as many are unaware that there is such an abundance of help and advice available to them for free. There are many steps involved in the home or property purchasing process and it is wise to begin interviewing Realtors and Real Estate Agents as soon as you decide to take that step in life towards home ownership. For more information on the Benefits of Hiring a Realtor During the Purchase of a New Home or Property, CLICK HERE.

If I Can Hire an Agent to Represent Me During the Purchase of a Home for Free, How Does My Agent Get Paid for Their Work?

First of all, Realtors (representing either the buyer or the seller) DO NOT GET PAID until the Real Estate transaction is closed. Good Realtors work loyally and diligently to aid their clients in selling and/or finding the best home or property for the best price, and all with a complete understanding that they will not make one penny unless you sell or purchase a home or property via their services. Real Estate Agents, as well as REALTORS are professionally obligated to stick with you throughout the transaction all the way to the closing table (and sometimes beyond the closing table). If something happens and a transaction fails to close, the Realtors typically make nothing for the services provided during the transaction, which is why it is important to only home-shop with an agent when you are serious about purchasing.

How does the Realtor or Real Estate Agent Get Paid Once the Transaction Closes?

As mentioned above, the Seller typically pays the Realtor Fees at the time of the transactions closing; most of the time the Realtor fees are subtracted from the proceeds of the home or property sale. The funds are sent to the Sellers Agents Brokerage, and then to the Buyers Agents Brokerage for the transaction; it is then distributed to the Buyers Agent. Generally, all of this is coordinated by the closing attorney before the transaction closes so that the Realtors or Real Estate Agents involved in the transaction are able to be paid at the closing table. Realtors and Real Estate Agents spend thousands upon thousands of dollars a year in expenses knowing that their success depends on their ability to close transactions.

What are Closing Costs?

Closing costs are separate, miscellaneous fees that are different from the Realtor Fees discussed above. Some examples of some of these fees may include:

Title Company Fees
Fees associated with recording the Deed
Loan Processing Fees
Attorney Fees for handling the closing of the transaction
Insurance
Surveyor Fees (if required)
Taxes
Homeowner Association Fees, which may or may not be prorated

The amount of fees and the number of different fees required differ from transaction to transaction, therefore, the total amount of fees can vary greatly. Typically, closing costs are approximately 3.5% of the sale price of the property or home. However, IT IS IMPORTANT TO UNDERSTAND that this is not always the case and these numbers can vary from as little as 2% up to 7% or even more. Be sure to speak with your agent and closing attorney about what fees may be involved in the purchase you are interested in making. Your agent will provide you with what is called a “good-faith” estimate of your closing costs from any lender you choose for your transaction before the closing takes place.

Who Pays for the Closing Costs?

Most closing costs are negotiable. There are times when a buyer will have written into the purchase contract/agreement that the seller will pay the buyer’s closing costs up to a certain amount or percentage of the transaction. A good Realtor or Real Estate Agent will discuss this with you when it comes time to submit your offer and will be ready to negotiate the contract for you in order for you to receive the best deal possible in your purchase. Sometimes, if the buyer cannot afford the purchase with the totaling closing costs and the seller will not negotiate to keep the contract, buyers can request that the closing costs be rolled into the mortgage for the purchase. Please note: this is not always possible and is not a guaranteed option. Buyers who think they might require such an option should speak with their lender about their individual options and possibilities.

Whether you are a Buyer or a Seller, it is extremely beneficial and important to understand the fees and costs associated with any real-estate transaction. Having this knowledge and a good agent by your side can aid in eliminating unwanted surprises close to the time of closing the Real Estate transaction.

Don’t let stress and anxiety overwhelm you when it comes to either buying a new home, selling your existing home or property, or both. Contact a local REALTOR to guide you through the process. It can be a fun and exciting time with the appropriate knowledge and representation by your side. If you are looking to purchase or sell in Northeast Georgia and would like to speak with a Realtor, fill out the form below today. Let us help guide you through the process.

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