Selling your home is a long journey with a lot of steps and, unfortunately, fees. The last part of the process — called closing — should be the light at the end of the tunnel, but all of the associated closing costs can be frustrating.
Who pays transfer taxes? Why are both the buyer and seller paying for title insurance? Are realtor fees part of the closing costs?
For sellers, the realtor fees paid at closing are the most expensive part of the real estate transaction — and they're not the only closing costs you'll be facing.
Luckily, savvy sellers can save up to 50% on realtor fees by choosing the right listing agent. Using a full-service, low commission agent lets you keep more money in your pocket without sacrificing service.
> Get a free, no-obligation consultation to find out how much you can save in realtor fees.
There are also other ways sellers are saving money these days. To understand them, let's discuss the difference between closing costs and realtor fees in more detail.
What are closing costs?
At the end of the real estate transaction, a lot of events have to align for the property title to successfully be transferred to the buyer. This period of time is called “closing” and there are fees involved.
Closing costs vary by state, municipality, and lender. They can also depend on the complexity of the real estate sale.
Buyers who need financing will have to pay a variety of fees for documents and processes required by the lender, bringing their closing costs to 3%-5% of a sale.
While sellers have fewer items to pay for during closing, they have to pay for the realtor commission fees which are normally 6%, so they end up paying more at closing.
How much are closing costs for sellers?
While sellers have fewer expenses to worry about, their closing costs can be more expensive because of realtors fees. Additional seller closing costs vary depending on the circumstances of the sale as well.
On top of realtor fees, which are usually run around 6%, sellers may also have to pay fees such as prorated taxes and HOA dues, home warranty premiums, transfer taxes and recording fees, title insurance, escrow fees, and attorney's fees.
Sellers may also agree to pick up some of the buyer's closing costs as part of the negotiation on the sale.
What are realtor fees?
When you use a realtor to sell your home, that realtor needs to be paid for the job they do. Agents work on commission and are only paid when the sale is completed. The seller pays their agent the total commission, then the seller's agent splits that fee with the buyer's agent.
How much are realtor fees?
Realtor's commissions depend upon the area and the kind of property for sale, but most full-service, traditional realtors charge 5%-6% of the selling price of the home.
The realtor fees are taken from the proceeds of the sale of the house. Half of the fees are paid to the seller's agent and half are paid to the buyer's agent.
For example, a $300,000 house would net $18,000 in total realtor fees. So, each agent would earn $9,000 on the sale.
How to Save Money Selling a House
As a seller, your goal is to get the most money for your house at the lowest expense. To get higher offers, marketing, staging, and prepping the house properly can make a big difference.
Anything in real estate can be negotiated, so be careful not to agree to pick up too many of the buyer's costs when working out a deal. It can get expensive. This is why you need an agent with good negotiating skills to save money.
Interview seller's agents until you find one with experience in your local market so they know what's closing costs are customarily paid by which party. A great agent can even work out a deal with the buyer covering some of your expenses.
Another option is to work with a full-service agent at a lower commission rate. Clever Real Estate partners with top agents across the country so sellers can benefit from all their skills and knowledge without paying the standard realtor fees.
Clever provides high-performing agents with a steady flow of business and in exchange they work for a flat fee or low-commission rate. You only pay a flat fee of $3000 dollars or 1% if your house sells for $350,000 or more.
> Connect with Clever and start interviewing the best agents in your area.
FAQs About Closing Costs and Realtor Fees
Are closing costs and commissions the same thing?
The short answer is, no. Closing costs and commission (realtor commission fees) are not the same thing. However, realtor commission fees are a part of the closing costs that the seller normally has to pay.
Closing costs are all the fees associated with legally transferring the title of the property to the buyer. Realtor fees have to be paid at closing along with all the other fees that sellers owe.
Are closing costs and realtor fees tax deductible?
Some closing costs are tax deductible for the seller such as any mortgage interest due at closing or property taxes. Realtor fees are not necessarily “tax-deductible” in the same way you can deduct mortgage interest. However, you do get to subtract your expenses for selling the house from the sales price of the house when you report it to the IRS.
What this does is lower the cost basis of any profit you made from the sale that you have to pay capital gains taxes on. Capital gains are your profits from selling your home after paying off your expenses for the sale and any outstanding mortgage debt.
Any repairs you made to increase the value of the property can also be considered expenses for selling the house if they are done 90 days before the sale of the property.
How can I avoid paying realtor fees?
You can avoid paying listing fees by not hiring a realtor to sell your house. If you sell your house “For Sale By Owner” (FSBO) you will not use a realtor. However, you will not have the benefit of all of the services that a realtor provides for you.
You risk selling your house for much less than the cost of realtor fees which would completely defeat the purpose of not paying realtor fees.
You'll also still be responsible for paying the buyer's agent commission regardless of whether you work with your own agent.
If you are looking to minimize realtor fees and get the best price for your home, it's a good idea to look into a flat-fee full-service realtor who can get a higher price and save you thousands in realtor fees.
What fees do you pay when buying a house?
When you buy a house, especially if you need financing from a lender, you have to pay fees for documents and procedures that your lender requires for your loan. Typical fees are for things like credit reports, processing the loan, title insurance, title search, and underwriting.
Other fees you may have to pay are appraisal fees, inspection fees, recording fees, attorney fees, and escrow fees. Escrow fees are usually split between the buyer and the seller. Buyer's fees can range between 3%-%5 of the sale price of the house.