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Do Closing Costs Include Realtor Fees?

There are many costs in a real estate transaction that come into play at the end of the deal. These closing costs can be confusing in regards to what they include and who pays them. Find out everything you need to know about closing costs and realtor fees.
Do Closing Costs Include Realtor Fees?

A real estate sale can be an expensive complex process. After all of the preparation, inspecting and negotiating, just because a deal is made, doesn't mean it's over. There is still closing and all of the closing costs required by both the buyer and the seller — realtor fees included.

Realtor fees of 6% are normally considered a part of the seller's closing costs and can take a huge chunk out of the seller's profit. This is why today's smart sellers find ways to minimize realtor fees and pay less during closing.

> Learn how you can save up to 50% on commissions.

Whether you're a buyer or a seller, here are some costs you can expect at closing and ways that you can save money on closing costs.

What are closing costs?

Closing costs are all of the fees and expenses associated with the closing or settlement of a real estate transaction. Closing takes place at the end of a house sale when the title of the property is transferred from the seller to the buyer.

The easiest way to think of closing costs is to understand that all the events that have to happen to finalize a deal don't happen automatically. They involve other people working in different roles, and those people need to be paid.

Closing costs depend on the state, county, lender, and the complexity of the real estate transaction. Buyers have a lot more items to pay for and their closing costs can range between 3%-5%. This is because most buyers need financing and a lot of the procedures and documents required by their lender have fees attached to them. There are also fees related to the property for inspections or appraisals.

Seller's closing costs can include prorated taxes and homeowners association dues, home warranty premiums, transfer taxes and recording fees, title insurance, attorney's fees, and real estate commissions — which usually run about 6% of the sales price.

In most cases, the seller and the buyer will split escrow fees unless they have negotiated a deal.

Do closing costs include realtor fees?

Realtor fees are included in closing costs and are usually taken from the sales price when the buyer's funds are transferred to the seller. When a home is sold, both the buyer's agent and the seller's agent earn a sales commission. The sales commission can vary but is usually around 6% of the sales price which is paid by the seller and split between the seller's and the buyer's agents.

Who is responsible for realtor fees?

Realtor's fees are usually paid for by the seller. The seller will pay the fees to their agent and then the seller's agent will split them with the buyer agent.

However, buyers can expect the seller to try and roll the expected realtors' fees into the price of the house to offset their cost. So, the buyer could end up paying the fees indirectly.

How can I avoid paying closing costs?

You can't avoid paying closing costs. They are necessary fees to process everything that legally must occur in order to transfer real estate property from one owner to another. But there are things that both the buyer and the seller can do to try and minimize closing costs.

An obvious pain point for sellers are realtor fees. Using a professional low-commission agent can help offset these fees. Sellers can also try to negotiate a lower commission rate with their agent before signing a listing agreement.

What if I can't afford closing costs?

If you're a buyer and you can't afford closing costs, you have a few options. You can ask your lender to include at least a portion of the closing costs in your loan. FHA and VA loans offer this option automatically.

Another approach is to include closing costs in your negotiations with the seller in exchange for easing up on repair demands or agreeing to a higher sales price than you were shooting for. That way the seller pays your closing costs, and your loan covers the increase in sales price.

How can you save when buying or selling a home?

If you're thinking of buying a house, you can shave thousands off of your purchase by improving your credit. The higher your credit score, the better the loan product and the lower the interest rate you will qualify for.

Another way you can save is by using an agent who offers a buyer rebate which can give you money back at the end of the sale if it's allowed in your state.

When selling your home, you obviously want to get the highest price for your house possible. Make sure you interview seller's agents until you have found one who has years of experience and knows their local market. A good seller agent will be an excellent negotiator to secure top dollar for your house.

FSBO

If you're selling your house and you want to save on realtor's commission fees, you can try to save money by selling it yourself. There are quite a few websites that allow you to list your home as a “For Sale By Owner” or FSBO.

But if you're not familiar with your local real estate market or don't know how to handle the sales and marketing responsibilities necessary to get the best price, you could lose thousands. You'll also still need to pay the buyer's agent commission fee.

Flat-Fee MLS

A flat-fee MLS listing service allows you to list your home on the Multiple Listing Service for a flat-fee. The MLS is the directory that agents use to find homes for buyers.

Similar to selling your home FSBO, you still need to know how to market and stage your house, negotiate with buyer's agents, and handle all potential buyers. Also, don't forget that you still have to pay the buyer's agent commission which is usually 3%.

Clever Real Estate

Selling your house as a FSBO or using a flat-fee MLS service may save you some on commissions, but those savings gets eaten up if you leave thousands in profit on the table.

Full-service, agent-assisted sales tend to score higher sales prices across the board. And you can use a traditional agent and get lower realtor fees.

Clever partners with local, top agents who provide all of the services of traditional agents for a flat-fee of $3,000, or 1% if the sale is over $350,000. This can save you up to 50% on commissions while getting the highest price possible on your home.

To save money on realtor commissions and still get all of the perks of using a full-service agent, connect with Clever to get matched with a top agent in your area.

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Jamie Ayers
Jamie Ayers

Jamie is the Director of Content at Clever Real Estate, the free online service that connects you with top real estate agents and helps you save thousands on commission. In the past, Jamie has managed columns for clients in a variety of leading business publications, including Forbes, Inc., CEO World, Entrepreneur, and more. At Clever, Jamie's primary goal is to provide home sellers, buyers, and investors with the information they need to successfully navigate the ins and outs of the real estate industry.

See all Jamie's Posts
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