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5 FAQs About Who Pays What in a Real Estate Transaction

Who pays what in a real estate transaction? The question that keeps both buyers and sellers awake at night. It can get confusing when trying to determine what your expenses will be when buying or selling a home. Here are the answers to your questions about cost breakdowns in a real estate transaction.
Who pays what in a real estate transaction? The question that keeps both buyers and sellers awake at night. It can get confusing when trying to determine what your expenses will be when buying or selling a home. Here are the answers to your questions about cost breakdowns in a real estate transaction.

Knowing who pays what in a real estate transaction can help you prepare and find ways to save money on anything from real estate agent commission fees to property taxes. Negotiation is the name of the game. Prior to closing, the parties involved in the real estate transaction will have the chance to negotiate who pays what.

Both buyers and sellers will have to shell out money to cover the costs of a home sale, but just how much money you’ll have to pay in a real estate transaction depends on a variety of factors. An experienced real estate agent can help you lower your costs whether you are a buyer or a seller.

But to get you started, here are the answers to all your questions about the breakdown of costs in real estate transactions.

FAQs About Who Pays What in a Real Estate Transaction

What does the seller have to pay when selling a house?

It is standard practice for the sellers to be responsible for covering realtor commission fees for both the seller’s and buyer’s agents. Real estate agent commission fees typically come up to around 6% of the home’s sale price which is split between both the buyer’s and seller’s agent.

In addition to commission fees, the seller is responsible for covering any costs related to renovations and repairs done prior to the sale of the home. Sellers often decide to update their home prior to selling to drive up the sale price, but they have to cover these costs out-of-pocket.

Sellers must pay closing costs on the home which can include a variety of expenses from home inspections to home warranties. Some of these expenses are split between the buyer and the seller, but, in general, the sellers pay more given the cost of commissions.

Sellers are also typically responsible for paying taxes on the home sale. These include transfer taxes, property taxes, and the dreaded capital gains tax. Taxes can take a huge chunk out of your profits, so most sellers try to avoid them by utilizing tax codes in their favor.

Who pays the settlement fee?

Settlement fees are normally a buyer’s expense. Most of these costs are associated with getting a mortgage. However, there are cases when a seller will cover settlement fees. The payment of these fees can be negotiated between the buyer and seller prior to closing.

Does a home buyer pay the realtor?

The home buyer does not typically pay realtor commission fees during the buying process. Real estate agents work on commission, meaning that they are paid only when they close the deal. However, in most real estate markets, buyer’s agent’s commissions are part of the sellers closing costs.

How can I negotiate closing costs?

Utility costs, loan payoffs, title transfer fees, home warranties, property taxes, and more are all closing costs that the buyer and seller have to worry about. Both parties in a real estate transaction have the chance to negotiate who pays what at closing.

Whether you are operating out of a buyer’s or seller’s market matters in your real estate transaction. A buyer’s market gives the buyer more negotiation power than a seller’s market would and vice versa. Negotiating after the home inspection will allow the buyer a chance to change their offers and closing cost expenses to reflect a fair price.

How can I avoid paying realtor fees?

If you have signed a contract and the realtor does the work of helping you to complete the home buying or selling process, you are obligated to pay them for their services. However, there are ways to save on realtor fees without compromising on quality service.

Working with an experienced full-service real estate agent at a flat fee or lower commission rate can save you thousands. Reduced commissions can vary, but are typically somewhere in the 1% to 3% of the home sale price range.

Clever Can Help

Clever Partner Agents can help to clarify any confusion regarding who pays what during a home sale. Both home buyers and sellers will need a talented agent to help with negotiations during the real estate transaction.

Clever Partner Agents are full-service real estate agents who work to get buyers in their dream homes and help sellers realize a profit on their sale. All while saving buyers and sellers money throughout the process. If you are interested in working with a Clever Partner Agent, contact us today.

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Reuven Shechter

Reuven Shechter is the Outreach Coordinator at Clever Real Estate, the free online service that connects you with top real estate agents to help save on commission. He spreads the word about Clever, disseminating studies to journalists and developing relationships with media outlets. Reuven is passionate about investing in real estate and creating lasting success for families. His writing has been featured in Max Real Estate Exposure, Leverage Marketing, and more.

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