When selling property, paying a listing agent is just the start of your expenses. From realtor commissions to prepping your home and many other costs in between, the expenses of selling real estate can soon add up.
The same goes for buying a home. You need to cover a down payment, lender fees, and often the costs of inspections.
Although closing costs and realtor fees vary depending on many factors, including whether you're the buyer or the seller, and your location, there are averages that most markets in the U.S. adhere to.
Buying and selling real estate doesn't need to break the bank, as long as you're prepared for the costs and have a good idea of what to expect.
You want to ensure you get the best bang for your buck during your real estate transaction.
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To give you the basic information you need to make a decision, here's what you need to know about average realtor fees and closing costs.
What are realtor fees?
A realtor fee — or a commission — is what a real estate agent charges for facilitating a real estate transaction.
If you're the seller, realtor fees are usually negotiated when you sign your listing agreement and are paid to the agent's brokerage at closing. While sellers are represented by the listing agent, they also pay for the buyer's agent commission; sellers pay the total commission and then it is split between the two agents (more on this later).
The average real estate commission in most markets in the U.S. is 5% to 6% of the total sales price of the home. According to August 2019 data from Zillow, the median home value in the U.S. is $229,000, making the commission $11,450 to $13,740.
Who pays realtor fees?
Typically the seller pays the realtor fees in most markets; however, in a particularly competitive seller's market, the buyer may offer to pay part of the commission to strengthen their offer.
When working out a listing agreement with their agent, the seller will also agree to a buyer's agent commission that will be included on the MLS listing. Since buyer's agents bring potential buyers to the table, it's in a seller's best interests to offer a competitive buyer's agent commission. Otherwise it will take longer than average to get an offer.
When deciding the list price of their home, most sellers take into account the agent's commission and adjust accordingly.
What's the average realtor fee amount?
The average realtor fee in the U.S. is between 5% and 6% of the total sales price. If you want to secure a lower commission for your property, you have to negotiate with the agent directly and ask them to lower their commission. Not all agents will agree to this.
How to Calculate Seller's Closing Costs
Sellers' closing costs include various fees associated with selling their home, such as title insurance, loan payoff fees, and property transfer taxes.
Here is a list of some of the most common closing costs sellers are responsible for, and the average amount you should expect to pay for each:
- Realtor commission: Realtors typically charge between 5% and 6% of the total sales price for their services; however, this varies depending on the location of the property, the type of property, and the individual agent.
- Title search: The title search ensures that you're the legal owner of the home and that there aren't any outstanding liens on the property. This typically costs around $300 to $600.
- Title insurance: The seller and buyer both usually purchase title insurance for the home, with the seller buying a policy for the new homeowner and the buyer buying a policy for their lender. Title insurance protects the buyer and the lender in case a title issue arises after closing. This usually costs a one time fee of $1000.
- Transfer taxes: Some states require that sellers pay a transfer tax to exchange property legally. This varies depending on the location of the sale and can be as low as 0% in North Dakota, to as high as 1% in New York.
- Recording fees: The local government charges recording fees for recording the sale or purchase of real estate. The county generally charges recording fees which vary according to the location of the property.
- Mortgage prepayment penalty: Some loans include a mortgage prepayment penalty which varies according to your loan terms.
- Outstanding amounts owed on the property: If you owe any outstanding costs on the property, such as unpaid HOA fees, this will also need to be factored into your closing costs.
In general, sellers should expect to pay between 8% and 10% of the total sales price in closing costs. On the median home value of $229,000, a seller should expect to pay anywhere from $18,320 to $22,900 in closing costs.
Additional Costs Considerations of Selling a Home
Another cost that sellers should consider is getting their property ready for the market, including any renovations and updates that may need completing.
Sellers should also be prepared for the buyer requesting credits at closing for any repair issues that are highlighted during the home inspection.
How to Calculate Buyer's Closing Costs
Buyer's closing costs include various fees associated with purchasing and financing their new home, such as the loan origination fee, appraisal fee, and property transfer taxes.
Here is a list of some of the most common buyers closing costs and the average you should expect to pay for each:
- Title search: If not covered by the seller, this can cost $300 to $600.
- Title insurance: Most lenders will require buyers to purchase title insurance meaning a one time fee of about $1000.
- Home inspection: Although not a legal necessity, most lenders require you to have a home inspection. It gives you a general overview of the condition of a home and can uncover any major structural issues. Inspections costs vary according to the size of the home, but start at around $315.
- Appraisal: If you're financing the purchase of your home, your lender will require you to pay for an appraisal. An appraisal is a professional opinion of the value of a home. The cost of an appraisal varies but is typically anywhere from $300 to $425.
- Transfer taxes: Varies depending on where the property is located.
- Recording fees: Varies according to the location of the property.
Additional Costs Considerations of Buying a Home
Buyers should also consider the costs of homeowners insurance and property taxes, as well as any necessary repairs — especially ones that affect the insurability of the home such as issues with the roof or unsafe electrical panels.
If you're planning on purchasing discount points to lower your loans interest rate you should also factor this into your closing costs. Buyers should expect to pay an additional 1% of their loan amount for one discount point.
How to Save Money on Realtor Fees and Closing Costs
One of the easiest ways to save money on realtor fees and closing costs is to work with a discount real estate agent. However, this often means compromising the number and the quality of services you receive. So while you save money on realtor fees, you spend more of your time and resources selling your home and often receive a lower price.
Another option is a low-commission, full-service real estate agent who can save sellers thousands of dollars in realtor fees and provide a top-notch selling experience.
Clever has partnered with high-performing agents across the country and pre-negotiated lower listing commissions for seller. You can list your home for a flat fee of $3000, or 1% on homes over $350,000 — no awkward negotiations necessary.
Since Clever only partners with the top agents in your area, they'll also help you walk away with more money because of their local knowledge and negotiation skills.
Get connected with a local agent and find out the best way to save money on your real estate transaction.
FAQs About Realtor Fees and Closing Costs
Do realtor fees include closing costs?
While you pay realtors at closing, realtor fees only cover the real estate agents' commissions. There are still additional closing costs sellers and buyers will need to pay. In most cases these expenses will be due in full on closing day so check with your agent to double check what you owe and how you should pay.
What percentage do most realtors charge?
Most realtors charge between 5% and 6% with the listing agent and the buyer's agent splitting the fee. However, this rate varies depending on the local market, the brokerage, and the individual agents. Even agents in the same office can differ on their commission price, so be sure to ask your chosen agent what their fees are.
How do I calculate my closing costs?
Your closing costs will differ depending on whether you are buying or selling a property, the location of your home, and your sales price.
Both sellers and buyers have closing costs to pay; however, the costs can vary significantly. For example, if you're a buyer who is financing the purchase of your home, you will incur additional charges from your lender, such as a loan origination fee.