does home seller pay all realtor fees

But it's only paid by the home seller. If you're selling your home and buying another with the same agent, they'll collect that 3 percent twice. How do realtor fees usually work? For most home sales, the seller deducts realtor commissions from their proceeds. Working with a realtor for your home purchase or sale is by no means Out of that commission, the agents then pay their brokerage fees.

Does home seller pay all realtor fees -

Most Canadians use a real estate agent when buying a home, paying real estate agent commissions. A realtor can help purchasers find the right home for the right price and guide them through the entire home buying process.

Generally, buyers don’t pay realtors directly. Instead, their compensation comes in the form of a commission on the property’s final sale price. Commissions for both the buyer’s and seller’s agents are taken off the top of the proceeds of the sale. While this might create the impression that the seller pays for the services, making realtors “free” for buyers, that’s not the case.

So, how does a buyer know how much they’re paying a realtor, and is there any way to pay less? Here’s what you need to know about real estate commissions when buying a home in Canada.

How much are commission rates for real estate agents in Canada?

Commissions paid to real estate agents in Canada typically range between 3% to 7% of the final purchase price, depending on region and the agent used.

So, for example, commissions on a home that sells for about $500,000 — the average price in Canada — would total $15,000 to $35,000. This amount would be split between the buyer’s and seller’s agents.

A home in a pricier location such as Vancouver or Toronto, which may sell for $1 million or more, would have total commission fees starting at $30,000 to $70,000.

Is it really “free” to use a realtor when buying a home?

No, this is a common misconception because the fee is built-in to the transaction. The buyer actually pays for all the commission fees — both for their own agent and the seller’s agent — as these fees are worked in the home’s total purchase price. The buyer is the one who will be paying off those extra thousands of dollars (plus interest) over the next 25 years.

To fully understand how buyers are on the hook for realtors’ commissions, you need to look at the transaction from the perspective of the seller.

Sellers want to get as much money as they can from the sale of their home. If 1.5% to 3.5% of the purchase price is going toward the buyer’s agent, that’s thousands of dollars the sellers will never see. In other words, if sellers know that they can reduce or eliminate the amount of money they must pay to a buyer’s agent, they’ll be open to negotiating a lower sale price on the property.

Can I save money on commissions by using an online real estate brokerage?

It depends on the type of service you are looking for and the brokerage you choose. There are currently two main business models for real estate brokerages in Canada, as explained below.

Buy Before You Sell Brokerage

These types of real estate brokerages allows the seller to buy the home you love, now, and sell without the stress, later. Properly, which currently operates in Ottawa, and Toronto, is a good example. Sellers pay a service fee of  5%  of the sale price—which is in line with traditional realtor commissions—but this fee includes a home inspection, cleaning, professional photography, and staging.

The real advantage, however, comes from the speed and convenience of the sale. Sellers don’t have to stage their home or conduct showings themselves, instead Properly takes care of that. Properly then lists the home for sale, and if it doesn’t sell within 90 days, Properly buys your home for the guaranteed price. Sellers know in advance how much they’ll get for their home, which allows them to unlock equity to buy their next home without having to list or sell their current home first. As such, Properly can be a good choice for current homeowners who want a no-nonsense, timely transaction, but not necessarily at cost savings. Read our full Properly review for all the information.

Learn more about Properly

Fixed-Fee Service 

As the name implies, fixed-fee real estate brokerages charge a flat amount to sellers instead of a commission fee based on a percentage of the sale price. Purplebricks, for example, which currently operates in Alberta, Manitoba and Ontario, charges $2,500 to $3,000 for homeowners to list and sell their properties, regardless of the home’s value. Both buyers and sellers are assigned a realtor in their neighbourhood—so you still benefit from the expertise of a licensed professional.

Cost-wise, the flat-fee model is advantageous to both buyers and sellers, since it keeps more money in the seller’s pocket, but also eliminates the hefty real estate commission fees that can inflate a home’s purchase price for buyers. Furthermore, Purplebricks buyers get $2,000 cash back on their purchases.

Learn more about PurpleBricks

Buying a home without an agent

Of course, you can also buy or sell a home without using the services of a real estate agent or online brokerage, if you choose. While this may provide cost savings, there are also risks to be aware of. Just make sure to get a real estate lawyer on board.

Tips for buying a home without an agent

Get a pre-approved mortgage. You don’t want a sale to fall through because you couldn’t get your financing arranged in time. Contact your bank or mortgage broker well in advance of making an offer to get pre-approved for a fixed or variable rate mortgage.

Do your research. Without the expertise of a realtor, you’ll need to brush up on the ins and outs of buying a home to ensure your purchase goes smoothly and you avoid any unexpected fees at closing. You should also research details that are particular to the neighbourhoods you are looking in, such as previous sale prices, typical closing periods, and if winning offers tend to be conditional or unconditional (more on this below).

Obtain legal advice. A home purchase involves contracts, title searches and other legal documents. Even if you decide to go without a realtor, you should still hire a real estate lawyer.

The risks of buying a home without an agent

  • Sales data is currently hard to come by. To negotiate effectively, you need to know how much comparable homes in the neighbourhood have sold for. (List prices aren’t much help since many homes sell for tens or even hundreds of thousands of dollars over asking.) Right now, realtors are the only ones who have easy access to this information online. But this is expected to change soon in Toronto and other regions in Canada, as the Toronto Real Estate Board recently lost an appeal to restrict such information.
  • Not everyone is a good negotiator. And even if you are, you probably haven’t negotiated many home sales. An experienced realtor, on the other hand, has done this very thing dozens or even hundreds of times before and has a sense of what works and what doesn’t.
  • You don’t know what you don’t know. A realtor knows the red flags to look for regarding potential problems (such as wet basements or mould) and is aware of all the disclosures a seller must provide. If you go it alone, you may not know what to ask or what you are legally entitled to.

What are the potential savings for buyers who don’t use an agent?

Say you’re buying a home in a neighbourhood where properties typically go for $800,000. Let’s assume commissions in this case total 5%, or 2.5% to the buyer’s agent (if you use one) and 2.5% to the seller’s agent. That’s $20,000 each, or a total of $40,000 in commissions. The seller would clear $760,000 from the sale ($800,000 sale price – $40,000 commissions).

If you decide not to use a realtor and explain this to the listing agent, you could put in a bid of $790,000 instead of the typical $800,000 and still win the sale. How so? The seller’s realtor should have no issue with the lower price since he or she will still receive about the same commission ($19,750 instead of $20,000). The seller, however, will clear $770,250 in the transaction ($790,000 sale price -$19,750 commissions), or $10,250 more than they would receive in the first scenario.

In this example, you save $10,000 off the purchase price (and thousands more in interest over the life of your mortgage) by not using an agent.

How to save money on real estate agent commission 

There are a few options available to buyers who want to save money on real estate commissions.

  • Negotiate a lower commission. While most home buyers understand they should be negotiating with lenders to get the best mortgage rates possible, many aren’t aware they can also negotiate commission fees with realtors. For example, if agents in your neighbourhood usually charge 3%, see if you can negotiate down to 2% instead.
  • Use an online real estate brokerage. Purple Bricks, for example, recently began operations in four Canadian provinces (Alberta, B.C., Manitoba and Ontario). Buyers are assigned a realtor in their neighbourhood and receive $2,000 cash back on their purchases, while sellers pay a flat fee of about $800 instead of a commission. Similarly, Moncton, NB-based Property Guys avoids commissions as homes listed on the site are for sale privately — meaning there’s no listing agent — for a flat fee. Buyers deal directly with the seller.
  • Buy a home on your own. If you’re looking for even greater savings, you could find and buy a home on your own without hiring a discount brokerage or buyer’s agent. Websites such as Realtor.ca, the Multiple Listing Service website run by the Canadian Real Estate Association, and Zillow, a U.S. website and mobile app, allow you to search for Canadian properties by postal code, city or province.

The Bottom Line

Buyers who use a real estate agent do pay indirectly for the expertise that a professional provides. But they can reduce the amount they pay by negotiating a lower commission with their agent, using a discount real estate brokerage, or forgoing the services of a realtor entirely if they feel comfortable going it alone.

Источник: https://youngandthrifty.ca/real-estate-agent-commissions-decoded/

Realtor Commission Fees & Rates

Massachusetts real estate commission rates impact all home sales.  How much is the average real estate commission? The average real estate commission rate for selling a home is between 5% and 6% of the sale price.

Are you a licensed real estate agent in Massachusetts and want to maximize your commission income? Join the best 100% commission Massachusetts real estate brokerage for real estate agent entrepreneurs so you can earn more, work fewer hours, and live a better life.

Real estate fees are a material component of any real estate transaction. As a real estate seller, be that a for sale by owner (FSBO) using a flat fee MLS listing service or a seller leveraging a traditional real estate brokerage at full commission, or a buyer, you’ll be better prepared and equipped throughout the real estate transaction process if you understand how real estate commission rates are established.  

How much is real estate commission? What are the average Massachusetts Realtor fees when selling a home? What’s a typical real estate commission percentage?

Helpful to know is how Realtor fees are split among the real estate professionals involved in a transaction.  And ultimately, based on recent studies, you’ll want to know what the average real estate commission rate is across the United States.

Interested in learning more about how buyer’s agents get paid, visit how much commission do buyer’s agents get paid?

No Standard Real Estate Commission Rates

It’s important for both buyers and sellers to realize that there are no “standard” real estate agent fees that can be charged by a real estate agent or broker.

While there may in an anecdotal manner be an average or typical real estate agent commission rate that develops in any given market, there is no single commission rate, Realtor fee, or standard real estate commission percentage rate for real estate agents, brokers, and Realtors and the services that they provide.

Naturally, an average will develop over time, yet there is no entity in the US real estate market that dictates or sets real estate agent commission fees.

Why not?

It comes down to an issue of antitrust law. Specifically, the Sherman Antitrust Act, dated 1890, which prohibits certain business activities that reduce competition.

In essence, real estate buyers and sellers have a choice in who they seek to represent them and the corresponding Realtor fees that they are required to pay for services rendered, and therefore competition exists.

That said, an individual real estate brokerage can mandate that their agents all charge a certain commission when listing a home for sale, that’s perfectly legal and at the discretion of the brokerage.  What’s not allowed is colluding among brokerages to use a specific commission rate, in effect, setting prices (commission income) in a market.

It was a landmark 1979 lawsuit, United States v. P Foley, that tied up Realtor fees with antitrust law and both heightened the scrutiny on real estate agent fees and altered the course of how real estate brokers conduct themselves as it relates to compensation from clients.

Sherman Act, 15 U.S.C. § 1 Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Who Pays Massachusetts Realtor Fees?

When considering the Realtor fees for selling a house in Massachusetts, keep in mind that the total real estate commission rate is decided upon before a home is placed in the Multiple Listing Service (MLS). A total amount of compensation is decided upon between the property owner and the real estate agent representing them, the listing agent or broker.

Most oftentimes the total compensation is a percentage of the sale price when listing a property for sale, and oftentimes one month’s rent when listing a property for rent.

In effect, property owners pay all Realtor fees when selling.

That total compensation or real estate commission rate is then split between the listing agent and the agent or broker that brings the buyer to the transaction (sometimes referred to as the cooperating broker). The split between the two is at the discretion of the listing agent, and agreed upon in writing with a seller before a property hits the MLS. The property owner can influence how the compensation is split, but rarely does in practice.

As an example for illustration purposes, a property owner and listing agent come to an established agreement that the total compensation, or real estate agent commission rate, for the listing of a property for sale will be 6%. It is then at the discretion of the listing agent to offer the cooperating broker, if there is one, part of that commission rate, for example, splitting it in half and providing 3% to the buyer’s agent.

Rarely discussed, there is an additional set of “splits” that take place, between the individual agents and the brokerage firms for which they work – individual agents, or real estate salespersons as they are called in Massachusetts, do not retain the entire gross real estate commission on a transaction. In the above example, the 3% each that the listing agent, and separately, the buyer’s agent receive is actually given to their brokerage firm and the firm takes a percentage and passes on the rest directly to the agent.

Real Estate Agent & Realtor Commission Fees Massachusetts

The latest (somewhat) thorough assessment of real estate commission fees was released in a 2011 real estate agent compensation report by Inman News.  After polling hundreds of real estate brokers and agents, their data show Realtor commissions for each real estate agent involved in a real estate transactionaverage between 2% and 3%.

So how much is real estate commission? The chart below describes, as a % of sale price, the typical real estate agent commission for a single transaction side (i.e. an individual listing agent, or separately, an individual buyer’s agent).

You will note from the below chart that the majority of respondents fall between 2% and 3%, with the skew going closer towards a 3% real estate agent commission rate per transaction side – these percentages represent the compensation each real estate professional receives, and in effect, need to be doubled to accurately represent the total Realtor fees for selling your home.

The total average real estate commission rate for selling a home is between 5% and 6% of the sale price.

Average Real Estate Commission Rates
Источник: https://entryonlynewengland.com/realtor-commission-fees-rates/

How a Commission Split Works in Real Estate

The majority of home shoppers, about 87 percent, use a real estate agent to complete their home purchase. This number continues to rise, and most homeowners also use an agent to sell their home, rather than selling on their own.

In 2018, The National Association of Realtors said agents make an average of $40,587 annually, although this number depends on a variety of factors. Aside from the number of completed transactions, pay depends on the amount of commission paid to the real estate brokerage and the commission split arrangement with the realtor's sponsoring broker.

The Broker-Agent Relationship and Commission Split Arrangement

Both agents and brokers hold state-issued real estate licenses. Agents must work under a broker, who serves as their sponsor. Agents cannot work independently, and also cannot be paid any fee or commission directly by a buyer or seller.

Brokers, on the other hand, can be involved in the buy or sell transactions, or hire agents to do the work instead. All commissions get paid to the broker, who then splits the money with any involved agents. If the broker works for a brokerage, they must pay a commission split to the brokerage as well.

Commission Fee Structure Mechanics

Though the accepted broker and agent method in a brokerage consists of sharing a transaction commission, it really operates more like a multi-level structure.

In a traditional real estate business, a seller would contract with an agent or broker to have their property listed for a set percentage of the selling price. The agent is sponsored by a broker who works for a listing brokerage, which lists the property in the Multiple Listing Service (MLS). The brokerage offers to share its sales commission with any MLS broker member who brings a buyer that completes the purchase. That's split #1.

Unless the broker in each of these companies is personally involved in the transaction, any involved agents would also be compensated. Per their written independent contractor agreement, each of the brokers, for the buyer and seller, would then split their portion of the commission with the buyer and seller agents as split #2.

Real Estate Compensation Models

Real estate agents and brokers can do business in pretty much any way they want as long as they follow their state laws for compensation. There is more than one way to get the job done, and they are intertwined with how they charge the customer for the work they do.

Traditional Commission Sharing Model

This article started out with a basic definition of the commission model. The listing client is charged a commission, currently running between around 4 percent and 8 percent on average, with 5 percent to 6 percent being common. The listing broker member of the MLS has agreed to share that commission, usually at a 50/50 split with any other broker or their agent who brings a buyer and closes. The seller is paying all commissions on the settlement statement. However, buyers should really know that it is factored into the price, so they are paying as well.

The broker and their agent then split their split again based on the independent contractor agreement between them. Most agents seem to start out and stay on a 50/50 split, in return for which they get specified broker services and marketing. As they build their business, brokers often raise the commission percentage going to the agent to keep them from leaving for a better deal.

The Office Fee Model

This concept pretty much originated with the Remax franchise. At that time and for years, the agent received 100 percent of the commission amount that came to the broker. The agent was charged an office fee for their space, certain office support functions, equipment, etc. The agent was totally responsible for their own marketing and other costs of operation.

This model changed after a while, with the percentage reduced to the agent, though it's still significantly higher than the traditional model.

The Salaried Agent Model

Redfin, a large and growing regional franchise, pays their agents a salary and provides some benefits normally associated with other salaried careers. This is in conjunction with giving a rebate to the customer/client for part of the commissions received by the brokerage. 

The Consultant Model

This one has had a tough time catching on, and it isn't allowed in some states. Also, it does create some issues with the independent contractor model, so it seems to work best for single broker business models. Basically, like an attorney or accountant, the real estate professional is paid by the hour for their services. Some also flat rate certain services, charging by the hour for extra services outside the package that's priced at the flat rate.

Part of the reason this method hasn't caught on is that buyers see paying the agent as a negative. They're not really understanding that they are paying anyway, as the seller factors the commission into their selling price. Some agents offer to bill through the process and then rebate to the buyer all money over that received as the commission.

Источник: https://www.thebalancesmb.com/commission-split-defined-2866375

Here's The Truth: Is a Real Estate Agent Worth the 6% Commission?

Is a Real Estate Agent Worth The Commission?

Is a Real Estate Agent worth the real estate commission? When you're ready to buy or sell, paying a Realtor® to help can go a long way in helping you walk away with the highest dollar amount in your pocket, even after the Realtor gets paid!

These are common questions that have fairly straightforward answers. When you consider that, in the US alone, 5.34 million homes were sold in 2019, you can expect a pretty standardized process.

A real estate agent commission isn't a simple transaction. Rather, a Realtor must work for that portion of the sales price. And their work is continuous.

It involves data crunching through a comparative market analysis, consistent marketing efforts (be they traditional or digital), and legal and logistical affairs that can be quite overwhelming for first time buyers or sellers. 

Still, we're going to provide you with a healthy lay of the land and allow you to decide for yourself. First, we'll break down the 6% fee in greater detail, tell you who pays it, and outline much of what's included in that 6% fee. (Or, at least, what should be covered if you have a high quality agent.)

Pour yourself a cup of tea, sit back in your newly-staged living room, and prepare to take a load off. We'll provide the data and information, and you can decide for yourself if it's a relationship worth having. 

What's The Real Estate Agent Commission?

When it's time to buy or sell a home, the thought of a real estate agent often enters the picture. Choose a Real Estate Agent based on who is going to get you the most money for your home sale, not the cheapest one. Often times this may cause people to begin thinking about if a Real Estate Agent is worth their commission.

Often, it boils down to a percentage, and Realtors only get paid if the sale goes through. In many ways, their efforts on the buyer's or seller's behalf determine their monthly income. 

In rare cases, you may hear of a real estate agent who charges a flat fee for their services. But, that's not the norm. Rather, most agents charge a percentage of the sales price of the home. Typically, you'll see 6% listed, but 5.5% isn't abnormal either. At the end of the day any percentage is possible and the real estate agent commission will be decided by you and your Realtor®. 

So, if a house sells for $249,000, the 6% commission would total $14,940.

Who Pays the 6% Fee?

We're not sure if this is good news or bad, but the 6% typically comes from the seller. Now, this doesn't mean that the seller needs to save up $720,000 and write a personal check. Rather, the 6% gets deducted from the sale of the home. 

Here's another important detail: the seller's agent doesn't pocket the entire 6%. Rather, it gets split between the buyer's agent and the seller's agent.

Typically, this is a split right down the middle. But, there are cases when a more experienced agent receives a little more than the less experienced agent. Which makes sense since the more experienced Real Estate Agent has likely seen it all helping you to avoid all of the common homebuying mistakes.

For some, it helps to imagine the "big picture." If you're the seller, there are other percentages to keep in mind. This may or may not help put your mind at ease, but a Realtor isn't the only expense to prepare for.

Other Fees of Note

A Realtor's commission isn't the only thing that gets deducted from the bottom line. Before a seller can take the check to the bank, there are a few other expenses they need to prepare for. Here's a quick and dirty checklist of some of those items:

  • Mortgage payoff
  • Capital gains taxes
  • Property taxes
  • Attorney fees
  • Transfer taxes
  • Title insurance
  • Escrow fee
  • Brokerage fee
  • Courier fee

Now, this doesn't cover everything. Some folks like to conduct a pre-sale inspection so they know what to anticipate. In some instances, it may be necessary to pay someone to stage the home. But, surely, those are optional costs. 

What's listed above (mostly) falls into the closing costs and those typically range from 2% to 4% of the final sale price. So, as a loose rule of thumb, sellers can anticipate a 4% expense on closing costs and a 6% expense for the real estate agents. 

What Does the 6% Cover?

Whether it's $12,000 or $720,000, six percent may seem like a lot. So, it's important to know what you're getting out of this deal. Let's discuss some of the ways Realtors will go to work (and to bat) for their clients. 

Sprucing up the Home

Okay. A Realtor won't come in with a dustpan and broom, but the good ones will help you see how to maximize your property for sale. 

Sometimes, you have to give a little to get a little. So, a good agent might recommend improvements that can boost the bottom line. If they've been in the game a while, they'll also be able to provide referrals for said improvements. 

This also takes us back to the (optional) task of completing a pre-sale home inspection. Whether you think it's worth it or not to conduct a home inspection prior to listing your home is totally up to you though it can help spot any major problems that may arise

  • Foundational issues
  • Structural integrity
  • Electrical issues
  • Plumbing issues
  • HVAC issues

This can go a long way in helping you negotiate repairs. There's nothing worse than the disappointment that comes when you're about to close the deal, only for roofing, electrical, or plumbing issues to put everything on hold. These are the types of problems home inspectors look for so you'll either learn about them prior to selling your home or after going under contract!

Photographing the Home

Sure, nowadays, with a filter or two, everyone's an iPhone photographer. We're not denying the beauty that comes from some of the edited personal photos we see out on Instagram and Facebook. 

They're never quite the same as truly professional photos. Professional photographers know how to photograph a galley kitchen to make it look light-filled and spacious. They understand angles, perspectives, and a slew of other techniques that they've studied. Having a wide-angle lens, extra lighting and the right editing techniques is what separates the true real estate photography pros from the rookies.

This is not to create deceiving photographs. Quite the opposite. It's to invite potential buyers to step into the home and see the magic for themselves. Photographs are taken early on in the process, and it's all part of everything that comes next. 

Deciding On a List Price

Have you ever been to a garage sale? It's interesting to see some people value their grandmother's crystal vase for $100 when it should really be tagged at $20. The reason this happens stems from sentimentality. 

It's hard to remain objective when we have emotions tied into the mix. A Realtor is able to push all that aside and conduct a straight-forward comparative market analysis (CMA).

Basically, they're examining all the homes that are currently on the market, pending, or have recently sold. This is not a straightforward affair. Just because a similar colonial down the road sold for $250,000 doesn't mean that's the correct selling price for your home. 

What if you've recently put on a new roof, invested in a new HVAC system, or upgraded your kitchen? Just because the homes look the same on the outside doesn't mean they're worthy of the same list price.

All these variables are things that your Realtor will happily take into consideration, saving you from the strain that comes with number-crunching. 

Marketing the Home

Here comes the part that's truly an on-going affair. With photographs, property descriptions, square footage measurements, and the listing price in place, your real estate agent will place your home on the multiple listing service (MLS) which will syndicate to other real estate websites. 

They'll be able to gain a lot more traction than anyone placing a For Sale By Owner (FSBO) sign in the front yard. And, in our experience, the trouble with an FSBO home is that some agents won't show their clients these homes.  

Sometimes, a buyer's agent doesn't want to deal with an FSBO home because they know there won't be a professional colleague on the other end of the deal. 

The expression, "It's who you know," plays into a home listing in a major way. Many agents can blast out an email to hundreds (if not thousands) of other Realtors to let them know a new gem has hit the market. 

A smart agent is also going to take other measures to move a house for sale. They'll post those lovely photos on Facebook, Instagram, Twitter, and other social media outlets. If they're a popular agency, it will do you wonders to have your house posted on their website. 

In the end, although a good Realtor does a lot for their client, their marketing capabilities alone can make that 6% fee worth its weight in gold. 

Negotiating the Deal

Here's another area where emotions quickly enter the scene. What if, as the seller, you receive an insultingly low offer on your list price? If you're human, you're going to feel the heat rise up to your cheeks. 

At this point, agents step in and handle the negotiations amongst themselves. They'll write up offers and counteroffers until things start to work in your favor.

This is also the stage where Realtors put on their Counselor hats. It's very difficult for home sellers to know if they're playing too much hardball or just the right amount. 

Ensuring homebuyers don't get cold feet is one of the best things Real Estate Agents do by setting proper expectations and managing problems before they arise.

A Realtor will tell you if you've done the right thing by rejecting that offer, accepting this offer, or moving on down the road. Despite what anyone says, buying or selling a home does take an emotional toll. 

Bringing the Deal to a Close

By the time you're ready to close, a Realtor's job will (mostly) be finished. But, again, this is a bit of a stressful time and it's often reassuring to have them by your side. Having an experienced Real Estate Agent will help you prepare before the appraiser comes by to value the home and provide the bank with their price estimate. A low appraisal can totally derail the process, an experienced Agent will make sure this doesn't happen.

They'll help you conduct the final walk-through, review the documents prepared by the lender or escrow agent, and review the terms of the contract. You want to make sure all your conditions have been satisfied before the deed formally transfers to the buyers. 

Some say a Realtor's marketing efforts are worth the 6% fee; others say their presence when legal paperwork is involved is worth the fee. It's entirely up to you, but good agents are often a safe place to land and, therefore, a worthwhile investment. 

Is a Real Estate Commission Worth It?

Well, what do you think? Do you find the worth of a real estate agent lies in their expertise? Would you rest assured, knowing they work for you as much as for their own, personal income? 

Imagine having to decide on an accurate list price, photograph the home, list it, market it, conduct negotiations, and examine contracts all on your own. We know you're up to the task. You're here reading about it, aren't you? 

But, if you want to lay a real estate commission in the balance with peace of mind and a successful sale, then we invite you to contact us today.

Here at Uphomes, we've helped a number of folks move to Charlotte, NC, and buy homes. We'd be more than happy to help you find a great home for sale in Charlotte.

You'll see that we don't spare any detail when it comes to a detailed listing, gorgeous property photos, and constant contact with all of our clients.

As you prepare to make one of the biggest decisions of your life, we'll be glad to take you by the hand and smooth out every road. We look forward to hearing from you soon!


Share This Article

 

Ryan Fitzgerald Raleigh RealtyHi there! My name is Ryan Fitzgerald, and I have a passion for everything real estate! My goal is to help you learn more about real estate through our Real Estate Blog whether it's the best places to live, move to or invest in real estate! Hopefully, you enjoyed the above blog post and it found a way to provide help or value to you. When you're ready to buy or sell a home of your own please let us know here at uphomes.com as we partner with only the best Realtors® all across the country. Also - Please feel free to join the conversation by dropping us a comment below... We love comments!

Print Share

Leave a Comment

Источник: https://www.uphomes.com/blog/real-estate-agent-commission.html

Who Pays Closing Costs, Buyer Or Seller?

Negotiating Seller Concessions

Sellers can agree, in many cases, to make some concessions toward closing costs. In a buyer’s market, for example, sellers may need to sweeten the deal by agreeing to concessions. Even in a seller’s market, some houses simply have been on the market too long, either because the asking price was too high to begin with or the property is in poor condition. In those cases, too, sellers might have to offer some financial incentive to buyers who are willing to consider these slow-moving homes.

However, just because a seller can pay for closing costs doesn’t mean they will. And just because they’re willing doesn’t mean they can. There are limits set by Fannie Mae and Freddie Mac, the government’s mortgage investors, who purchase mortgages that conform to their rules for sale in the secondary mortgage market.

Conventional Mortgage: Limits on Seller Concessions

Type Of Property

Amount Of Down Payment

Limit On Seller Concessions

Primary residence or second home 

less than 10%

3%

          

Primary residence or second home 

          

 

 

10-25%     

6%

Primary residence or second home 

25% or more

9%

Investment Property 

Any amount  

2%

Additionally, FHA, FHA 203(k), VA, USDA loans have their own limits:

Buyer Loan Type

Maximum Seller Contributions

FHA

6%

FHA 203K

6%

VA

4%

USDA

6%


Do Your Research

So how much of a seller’s concession can you get? It’s all about the negotiation.

We talked to REALTOR® and Certified Negotiation Expert (CNE) Ina Sajovich about the best way to ask for and to get sellers to accept your request for concessions to help with closing costs. Sajovich said that having an experienced REALTOR® or agent on your side can really be helpful because they know the market and what’s common. For example, take the scenario we talked about earlier where a buyer has to pay a higher price to get their offer accepted.

“In our current market, the best way to ask for and receive a seller concession is to have your agent scour the recent sales for similar comps (comparable properties) that have closed with seller concessions,” she said. “This can help offset the higher purchase price many buyers have to offer in order to get under contract.”

By having the seller pay for certain items in your closing costs, it enables you to make a higher offer. Therefore, you’ll effectively be paying your closing costs throughout the life of the loan rather than upfront at the closing table because they’re now built into your loan amount. This can save you from having to spend a ton of money just to get in the door.

Your agent may also have insight into just how motivated the sellers are to move. If they need to get rid of the home, they may be more willing to work with you on concessions than a seller who can afford to wait for the best possible offer.

Stand Out By Covering Closing Costs

However, you might also save money by taking the opposite tack.

Although seller concessions can be nice, there’s a flip side: Sellers are often motivated to work with the prospective buyer who has the cleanest offer with the fewest strings attached.

For example, if you’re in a situation where there are multiple bids on the home, it may actually work to your advantage to have a lower bid but the ability to pay for your full closing cost, rather than to have a higher bid with concessions included.

“We are pretty lucky in our area because, even though we are in a low inventory seller’s market,” Sajovich said. “It is common for sellers to pay for the title insurance policy and to split closing costs. In multiple offer situations, many buyers’ agents don’t realize that the buyer could cover these costs, which puts money in the sellers’ pocket without increasing purchase price and running the risk of having the appraisal come in low. This is where I often see that an offer price that is $2,000 or $3,000 less than any other offer can still get the house.”

Because a lender can’t lend you any more than the home is worth, a seller may actually benefit if you don’t offer more because you’re lowering the risk of the deal falling through later on. If you pay the closing costs for yourself, it makes it that much sweeter.

Источник: https://www.quickenloans.com/learn/who-pays-closing-costs

What Are the Closing Costs for a Home Seller?

Once you've accepted an offer on your home, you may be anticipating a nice profit. But then come all of the closing costs you’re expected to pay. Closing costs for a seller can amount to roughly 6% to 10% of the sale price.

On the bright side, unless you have very little home equity, the closing costs will simply be deducted from the proceeds from the sale of the home. You're still spending the money, but since it never hits your bank account in the first place, losing it can hurt a little less.

Both you and the buyer will receive a closing disclosure three days prior to the actual closing. This will lay out all the details of the sale with real numbers, so you'll know what everything costs — and have the chance to get any errors corrected.

Here's an overview of common closing costs for sellers, plus tips on ways you might be able to lower them.

» MORE:Costly home selling mistakes to avoid

Real estate agent commissions

Real estate agent commissions are the most significant closing cost the seller typically pays.

It’s common for the seller to pay the commission for both the listing agent and the buyer’s agent. That’s usually a 6% hit to your bottom line, with 3% of the home’s selling price going to each agent involved in the transaction. On a $250,000 home sale, that would amount to $15,000.

To lower this cost, you could decide to take the 'for sale by owner' approach, though you'd still have to pay the buyer's agent. You can look for a discount agent, though be aware that their low commission may come with fewer services. If you're selling in a hot market, your home is especially high value or your listing agent is also helping you buy your next home, you may be able to negotiate a lower commission.

» MORE:Calculate your closing costs

Title insurance

The lender’s title insurance policy is another closing cost a seller can expect to pay.

Prior to a sale, a title search is conducted to verify ownership. In some states, a real estate attorney is required to review the title as well. A title policy protects the lender (and the new home buyer, if they opt to buy a policy of their own) against unexpected ownership claims that may arise.

While not common, an ownership claim can trigger legal disputes — and the extensive lawyer's fees that come with them. You can't lower the title insurance cost, but its price is probably worth the potential trouble it could save you.

Taxes and fees

Which party pays what fee may be negotiable, but the precise costs of many filing and recording fees or transfer taxes are determined by the state or local jurisdiction. Sellers will often be required to pay the property or deed transfer tax.

Property taxes, as well as homeowner association fees, will likely be split with the buyer (unless you, as a seller, agree to cover them). These are normally prorated based on the closing date. So, for example, if you were closing on the 15th of the month, as the seller you'd be on the hook from the first through the 14th. As the home's new owner, the buyer would pick up the tab starting on closing day.

Taxes and fees are generally not negotiable, though in an especially hot seller's market you might be able to get a buyer to take on more of the fees. But since which party pays these may be defined by local laws, you're unlikely to get out of those the government deems the seller's responsibility.

Seller concessions

In a buyer's market, or just to make the deal go through, you might agree to pay some of the closing costs. This is referred to as a seller concession, seller contribution or seller credit — these terms all mean the same thing. Agreeing to cover the cost of necessary repairs found during the home inspection is a common seller concession.

If your buyer isn't paying with cash, the total amount of seller concessions may be limited by what type of home loan they're using. For a conventional loan on a single-family home that will be a primary residence, the limits on seller concessions vary from 3% to 9% depending on the size of the buyer's down payment and whether they're receiving closing cost assistance from other sources. Loans backed by government agencies, such as the Federal Housing Administration, have their own limits on seller concessions.

» MORE: Tips for selling your home in any market

Other costs for home sellers

Though it's not exactly a closing cost, it is important to keep in mind that unless you own your home outright, a sizable chunk of your profits will likely go toward paying off your current mortgage. You may be hit with a fee for paying off your mortgage early. Look at your mortgage documents to see whether you have a prepayment penalty.

If there are any liens or judgments against the property, you'll have to pay those before it can be sold. These may be uncovered in the title search.

Last, if you have a second mortgage, like a home equity loan or a home equity line of credit, those will need to be paid in full before you can sell. (These can also be subject to prepayment penalties.) Since those loans are secured by the property, you can't continue borrowing if you no longer own the home.

Источник: https://www.nerdwallet.com/article/mortgages/closing-costs-home-seller

watch the thematic video

Do Buyer's Pay Realtor Fees? How Real Estate Commissions Work - Vancouver Real Estate

Does home seller pay all realtor fees -

Buying or selling property is rather a complicated process, beyond the apprehension of a common man. To handle the market challenges, legal requirements, long contracts or financial matters ‘Real Estate Agents’ exists. Real estate agents help you to traverse the process of buying or selling from beginning to end. Accompany of an experienced agent help you to get best property deals but still some people shy away from agent. Why? Because they don’t understand how agent get paid. Generally, real estate agents make money from commission based on the property’s selling price, but many of you don’t know how all this work. Another question that roams in buyers’ or sellers’ mind is that ‘will agents really do enough for you to earn the commission they demand?

How real Estate Agent Gets Paid

Agents of both sides will be offered a percentage of the sales price of the property they sold or help client to buy. They don’t receive any payment until and unless a property transaction closes. Typically most commissions in New Jersey are between 5-6 % of sales price, depending on the discussion with seller, motivation to sell quickly or the property itself. Each real estate company follows their policy and threshold, but it is negotiable according to the state law.

Both the seller’s agent and an agent representing buyer will be paid out of the funds that the buyer gives to the seller at the time of closing. This means, as a seller, you are responsible for seeing that agents of both sides receive their commissions. Their commissions are wrapped up into the selling price of the property, to be paid out at closing. For example, if a person plans to sell his home at $400,000 and hires an agent. The agent and seller agree upon how much he and buyer’s agent will be paid. Let’s say they decide seller’s agent will get 3 % and the buyer’s agent will receive 2.8 %. This means if house sells at exact $400,000, seller’s agent will get $12,000 while the buyer’s agent will get $11,200. The total amount of commission $23,200 will be deducted from money seller that receives from the buyer.

Settling on the Commission Amount

As we mention above commission price is not set in stone, they’re negotiable until agreed upon in writing by the parties. Moreover, in almost every state of America it is illegal for agents to collude to set a fixed rate. It is more common now for agents to ask for flat rate payments, they are also free to enter into arrangements where they are paid before closing. Don’t assume that only way to pay your agent is percentage of sales price but you can discuss the other options as well, such as on an hourly basis or a flat rate.

Changes and Adjustments to the Final Price Affect the Agent’s Commission

The changes in final prices will affect the agent’s commission. If house sells for more, the commission increases and if sell for less, the commission rate decreases. Using the above mention example, if a person has trouble selling and he accept the offer of $380,000, the agents will receive 3 % and 2.8 % respectively. Similarly if house sells at $480,000, the agents will earn the agreed upon percentages of new price. The buyer and seller may negotiate while the property is under contract on various monetary adjustments due to inspection items or other issues. If the adjustment is made in the form of credit to the buyer at closing and the sales price remains the same as it’s before then agents commission will also remain the same. However, in case the adjustment comes in the form of a price reduction, the agent’s commission will be reduced according to the change in sales price.

Do Real Estate Agents Do Enough To Earn Commission?

We all hear often that real estate is the best market to make money. The commission seller pay to the agent seems large but seller not aware of many different costs that agent has to pay. Do agents do enough for you to earn the commission? A question that many people want to know. Let me highlight some of the tiring and complicated work that agents do expertly to make your buying or selling process smooth.

To sell any property, agents put substantial time in preparing a home to put it on multiple listing service such as taking good photos and their editing, researching about the property, writing of property description and making sure that all the essential documents is completed.   Listing the property, setting up a showing service, printing flyer and creating websites are things your agent absorbs before a sale is made without charging. In order to maintain their license, brokerage fees and for continuing education seminars agents have to pay a lot. All these take big chunk of agent’s earning. Moreover, the commission also alleviates the risk that the agent takes by sustaining all those costs without any guarantee that the property will ever sell. 

Источник: https://patch.com/new-jersey/west-windsor/classifieds/announcements/62358/how-much-real-estate-agent-will-cost-in-new-jersey-average-analysis

Most Canadians use a real estate agent when buying a home, paying real estate agent commissions. A realtor can help purchasers find the right home for the right price and guide them through the entire home buying process.

Generally, buyers don’t pay realtors directly. Instead, their compensation comes in the form of a commission on the property’s final sale price. Commissions for both the buyer’s and seller’s agents are taken off the top of the proceeds of the sale. While this might create the impression that the seller pays for the services, making realtors “free” for buyers, that’s not the case.

So, how does a buyer know how much they’re paying a realtor, and is there any way to pay less? Here’s what you need to know about real estate commissions when buying a home in Canada.

How much are commission rates for real estate agents in Canada?

Commissions paid to real estate agents in Canada typically range between 3% to 7% of the final purchase price, depending on region and the agent used.

So, for example, commissions on a home that sells for about $500,000 — the average price in Canada — would total $15,000 to $35,000. This amount would be split between the buyer’s and seller’s agents.

A home in a pricier location such as Vancouver or Toronto, which may sell for $1 million or more, would have total commission fees starting at $30,000 to $70,000.

Is it really “free” to use a realtor when buying a home?

No, this is a common misconception because the fee is built-in to the transaction. The buyer actually pays for all the commission fees — both for their own agent and the seller’s agent — as these fees are worked in the home’s total purchase price. The buyer is the one who will be paying off those extra thousands of dollars (plus interest) over the next 25 years.

To fully understand how buyers are on the hook for realtors’ commissions, you need to look at the transaction from the perspective of the seller.

Sellers want to get as much money as they can from the sale of their home. If 1.5% to 3.5% of the purchase price is going toward the buyer’s agent, that’s thousands of dollars the sellers will never see. In other words, if sellers know that they can reduce or eliminate the amount of money they must pay to a buyer’s agent, they’ll be open to negotiating a lower sale price on the property.

Can I save money on commissions by using an online real estate brokerage?

It depends on the type of service you are looking for and the brokerage you choose. There are currently two main business models for real estate brokerages in Canada, as explained below.

Buy Before You Sell Brokerage

These types of real estate brokerages allows the seller to buy the home you love, now, and sell without the stress, later. Properly, which currently operates in Ottawa, and Toronto, is a good example. Sellers pay a service fee of  5%  of the sale price—which is in line with traditional realtor commissions—but this fee includes a home inspection, cleaning, professional photography, and staging.

The real advantage, however, comes from the speed and convenience of the sale. Sellers don’t have to stage their home or conduct showings themselves, instead Properly takes care of that. Properly then lists the home for sale, and if it doesn’t sell within 90 days, Properly buys your home for the guaranteed price. Sellers know in advance how much they’ll get for their home, which allows them to unlock equity to buy their next home without having to list or sell their current home first. As such, Properly can be a good choice for current homeowners who want a no-nonsense, timely transaction, but not necessarily at cost savings. Read our full Properly review for all the information.

Learn more about Properly

Fixed-Fee Service 

As the name implies, fixed-fee real estate brokerages charge a flat amount to sellers instead of a commission fee based on a percentage of the sale price. Purplebricks, for example, which currently operates in Alberta, Manitoba and Ontario, charges $2,500 to $3,000 for homeowners to list and sell their properties, regardless of the home’s value. Both buyers and sellers are assigned a realtor in their neighbourhood—so you still benefit from the expertise of a licensed professional.

Cost-wise, the flat-fee model is advantageous to both buyers and sellers, since it keeps more money in the seller’s pocket, but also eliminates the hefty real estate commission fees that can inflate a home’s purchase price for buyers. Furthermore, Purplebricks buyers get $2,000 cash back on their purchases.

Learn more about PurpleBricks

Buying a home without an agent

Of course, you can also buy or sell a home without using the services of a real estate agent or online brokerage, if you choose. While this may provide cost savings, there are also risks to be aware of. Just make sure to get a real estate lawyer on board.

Tips for buying a home without an agent

Get a pre-approved mortgage. You don’t want a sale to fall through because you couldn’t get your financing arranged in time. Contact your bank or mortgage broker well in advance of making an offer to get pre-approved for a fixed or variable rate mortgage.

Do your research. Without the expertise of a realtor, you’ll need to brush up on the ins and outs of buying a home to ensure your purchase goes smoothly and you avoid any unexpected fees at closing. You should also research details that are particular to the neighbourhoods you are looking in, such as previous sale prices, typical closing periods, and if winning offers tend to be conditional or unconditional (more on this below).

Obtain legal advice. A home purchase involves contracts, title searches and other legal documents. Even if you decide to go without a realtor, you should still hire a real estate lawyer.

The risks of buying a home without an agent

  • Sales data is currently hard to come by. To negotiate effectively, you need to know how much comparable homes in the neighbourhood have sold for. (List prices aren’t much help since many homes sell for tens or even hundreds of thousands of dollars over asking.) Right now, realtors are the only ones who have easy access to this information online. But this is expected to change soon in Toronto and other regions in Canada, as the Toronto Real Estate Board recently lost an appeal to restrict such information.
  • Not everyone is a good negotiator. And even if you are, you probably haven’t negotiated many home sales. An experienced realtor, on the other hand, has done this very thing dozens or even hundreds of times before and has a sense of what works and what doesn’t.
  • You don’t know what you don’t know. A realtor knows the red flags to look for regarding potential problems (such as wet basements or mould) and is aware of all the disclosures a seller must provide. If you go it alone, you may not know what to ask or what you are legally entitled to.

What are the potential savings for buyers who don’t use an agent?

Say you’re buying a home in a neighbourhood where properties typically go for $800,000. Let’s assume commissions in this case total 5%, or 2.5% to the buyer’s agent (if you use one) and 2.5% to the seller’s agent. That’s $20,000 each, or a total of $40,000 in commissions. The seller would clear $760,000 from the sale ($800,000 sale price – $40,000 commissions).

If you decide not to use a realtor and explain this to the listing agent, you could put in a bid of $790,000 instead of the typical $800,000 and still win the sale. How so? The seller’s realtor should have no issue with the lower price since he or she will still receive about the same commission ($19,750 instead of $20,000). The seller, however, will clear $770,250 in the transaction ($790,000 sale price -$19,750 commissions), or $10,250 more than they would receive in the first scenario.

In this example, you save $10,000 off the purchase price (and thousands more in interest over the life of your mortgage) by not using an agent.

How to save money on real estate agent commission 

There are a few options available to buyers who want to save money on real estate commissions.

  • Negotiate a lower commission. While most home buyers understand they should be negotiating with lenders to get the best mortgage rates possible, many aren’t aware they can also negotiate commission fees with realtors. For example, if agents in your neighbourhood usually charge 3%, see if you can negotiate down to 2% instead.
  • Use an online real estate brokerage. Purple Bricks, for example, recently began operations in four Canadian provinces (Alberta, B.C., Manitoba and Ontario). Buyers are assigned a realtor in their neighbourhood and receive $2,000 cash back on their purchases, while sellers pay a flat fee of about $800 instead of a commission. Similarly, Moncton, NB-based Property Guys avoids commissions as homes listed on the site are for sale privately — meaning there’s no listing agent — for a flat fee. Buyers deal directly with the seller.
  • Buy a home on your own. If you’re looking for even greater savings, you could find and buy a home on your own without hiring a discount brokerage or buyer’s agent. Websites such as Realtor.ca, the Multiple Listing Service website run by the Canadian Real Estate Association, and Zillow, a U.S. website and mobile app, allow you to search for Canadian properties by postal code, city or province.

The Bottom Line

Buyers who use a real estate agent do pay indirectly for the expertise that a professional provides. But they can reduce the amount they pay by negotiating a lower commission with their agent, using a discount real estate brokerage, or forgoing the services of a realtor entirely if they feel comfortable going it alone.

Источник: https://youngandthrifty.ca/real-estate-agent-commissions-decoded/

Who pays for closing costs in California?

In any real estate transaction, there are closing costs that are to be paid by both the buyer and the seller, and it's important to remember that these can vary from state to state and transaction to transaction.

I wanted to give you a quick run down from both a buyer and a seller perspective for California.

Typical Closing Costs Paid by the Seller

Let’s start with closing costs that are typically paid by the seller. A back of the envelope estimate would reveal that it would cost most sellers between 6 and 8 percent of the sales price to sell their home. The majority of the this is going to be wrapped up in real estate commissions as the seller generally pays between 4 and 6 percent of the sales price to sell it. The other 1 to 3 percent may be in other closing costs like back property taxes that are owed by the seller that will have to be paid at the close of escrow.

Even if the property taxes are not delinquent, these taxes are a seller responsibility until the escrow closes. For example, if the transaction were to close on April 10th, the property taxes up until April 10th would the responsibility of the seller. Anything after that date would be passed to the buyer side of the closing. Sellers will also have to pay their share of escrow fees and any back homeowner association dues until the date that the escrow closes.

The seller will also pay for any repairs that the buyer successfully negotiates during the escrow process. A home inspection, for example, might reveal that a roof is leaking and instead of the seller fixing the roof, the buyer may ask for a $7,000 credit to fix the roof in lieu of the actual repair. This would be deducted from the seller's proceeds at the close of escrow.

The industry standard in California is also that the seller will pay for a title insurance policy protecting the buyer.

Common Closing Costs Paid by the Buyer

As it relates to the buyer, a quick estimate of their costs would reveal a range between 1-3 percent of the sales price, with most of this is going to go to fees charged by the lender.

A lender may charge a fee, known as a point that is equal to one percent of the loan amount. The point could be categorized as either a discount point or an origination point. The difference between the two is that a discount point is a point paid to the lender to lower the interest rate on the loan. An origination point, on the other hand, is a fee that is paid to the lender to compensate them for actually doing the loan.

Generally, buyers will also pay the lender a credit report fee and are also responsible for their share of prorated property taxes. Generally, buyers will also pay for a title insurance policy covering the lender. This is different than the owner's title insurance policy that I described above that the seller paid for to protect the buyer.

What this means is that there’s two policies of title insurance in connection with a real estate transaction on which there is a loan. First, there is an owner’s policy to protect the buyer as well as a lender policy covering the lender. Buyers will also pay for their share of any escrow fees which are negotiable in California.

Speaking of escrow fees, it’s important to note that there’s usually a base escrow fee of between $200 and $400 and then the escrow fees themselves are often $2-$3 per thousand per side. Larger real estate transactions of several million dollars might have a lower per thousand escrow fee. It's also helpful to remember that many of these fees are negotiable. Certainly real estate commissions are negotiable but an often overlooked point is escrow fees can also be negotiated with the escrow holder.

How to Calculate Closing Costs – A Simple Example

As an example on a $600,000 purchase the base escrow fee might be:

$300
+
$2/$1,000 = 600 x $2 = $1,200

$1,200 + $300 base fee = $1,500 for each side of the deal.

Buyers also generally pay for an appraisal on the property as required by their lender and a home inspection and other inspections as part of their due diligence.

Before you get your real estate license in California, it's important to familiarize yourself at some level with the typical closing costs, so you can properly inform your client. Often, real estate agents will produce something called a net sheet which estimates the costs to complete a transaction. Your broker should train you on how to properly fill these out so you can demonstrate that you're as informed as possible.

Love,

Kartik

Источник: https://www.adhischools.com/blog/who-pays-for-closing-costs

How a Commission Split Works in Real Estate

The majority of home shoppers, about 87 percent, use a real estate agent to complete their home purchase. This number continues to rise, and most homeowners also use an agent to sell their home, rather than selling on their own.

In 2018, The National Association of Realtors said agents make an average of $40,587 annually, although this number depends on a variety of factors. Aside from the number of completed transactions, pay depends on the amount of commission paid to the real estate brokerage and the commission split arrangement with the realtor's sponsoring broker.

The Broker-Agent Relationship and Commission Split Arrangement

Both agents and brokers hold state-issued real estate licenses. Agents must work under a broker, who serves as their sponsor. Agents cannot work independently, and also cannot be paid any fee or commission directly by a buyer or seller.

Brokers, on the other hand, can be involved in the buy or sell transactions, or hire agents to do the work instead. All commissions get paid to the broker, who then splits the money with any involved agents. If the broker works for a brokerage, they must pay a commission split to the brokerage as well.

Commission Fee Structure Mechanics

Though the accepted broker and agent method in a brokerage consists of sharing a transaction commission, it really operates more like a multi-level structure.

In a traditional real estate business, a seller would contract with an agent or broker to have their property listed for a set percentage of the selling price. The agent is sponsored by a broker who works for a listing brokerage, which lists the property in the Multiple Listing Service (MLS). The brokerage offers to share its sales commission with any MLS broker member who brings a buyer that completes the purchase. That's split #1.

Unless the broker in each of these companies is personally involved in the transaction, any involved agents would also be compensated. Per their written independent contractor agreement, each of the brokers, for the buyer and seller, would then split their portion of the commission with the buyer and seller agents as split #2.

Real Estate Compensation Models

Real estate agents and brokers can do business in pretty much any way they want as long as they follow their state laws for compensation. There is more than one way to get the job done, and they are intertwined with how they charge the customer for the work they do.

Traditional Commission Sharing Model

This article started out with a basic definition of the commission model. The listing client is charged a commission, currently running between around 4 percent and 8 percent on average, with 5 percent to 6 percent being common. The listing broker member of the MLS has agreed to share that commission, usually at a 50/50 split with any other broker or their agent who brings a buyer and closes. The seller is paying all commissions on the settlement statement. However, buyers should really know that it is factored into the price, so they are paying as well.

The broker and their agent then split their split again based on the independent contractor agreement between them. Most agents seem to start out and stay on a 50/50 split, in return for which they get specified broker services and marketing. As they build their business, brokers often raise the commission percentage going to the agent to keep them from leaving for a better deal.

The Office Fee Model

This concept pretty much originated with the Remax franchise. At that time and for years, the agent received 100 percent of the commission amount that came to the broker. The agent was charged an office fee for their space, certain office support functions, equipment, etc. The agent was totally responsible for their own marketing and other costs of operation.

This model changed after a while, with the percentage reduced to the agent, though it's still significantly higher than the traditional model.

The Salaried Agent Model

Redfin, a large and growing regional franchise, pays their agents a salary and provides some benefits normally associated with other salaried careers. This is in conjunction with giving a rebate to the customer/client for part of the commissions received by the brokerage. 

The Consultant Model

This one has had a tough time catching on, and it isn't allowed in some states. Also, it does create some issues with the independent contractor model, so it seems to work best for single broker business models. Basically, like an attorney or accountant, the real estate professional is paid by the hour for their services. Some also flat rate certain services, charging by the hour for extra services outside the package that's priced at the flat rate.

Part of the reason this method hasn't caught on is that buyers see paying the agent as a negative. They're not really understanding that they are paying anyway, as the seller factors the commission into their selling price. Some agents offer to bill through the process and then rebate to the buyer all money over that received as the commission.

Источник: https://www.thebalancesmb.com/commission-split-defined-2866375

Who Pays Closing Costs, Buyer Or Seller?

Negotiating Seller Concessions

Sellers can agree, in many cases, to make some concessions toward closing costs. In a buyer’s market, for example, sellers may need to sweeten the deal by agreeing to concessions. Even in a seller’s market, some houses simply have been on the market too long, either because the asking price was too high to begin with or the property is in poor condition. In those cases, too, sellers might have to offer some financial incentive to buyers who are willing to consider these slow-moving homes.

However, just because a seller can pay for closing costs doesn’t mean they will. And just because they’re willing doesn’t mean they can. There are limits set by Fannie Mae and Freddie Mac, the government’s mortgage investors, who purchase mortgages that conform to their rules for sale in the secondary mortgage market.

Conventional Mortgage: Limits on Seller Concessions

Type Of Property

Amount Of Down Payment

Limit On Seller Concessions

Primary residence or second home 

less than 10%

3%

          

Primary residence or second home 

          

 

 

10-25%     

6%

Primary residence or second home 

25% or more

9%

Investment Property 

Any amount  

2%

Additionally, FHA, FHA 203(k), VA, USDA loans have their own limits:

Buyer Loan Type

Maximum Seller Contributions

FHA

6%

FHA 203K

6%

VA

4%

USDA

6%


Do Your Research

So how much of a seller’s concession can you get? It’s all about the negotiation.

We talked to REALTOR® and Certified Negotiation Expert (CNE) Ina Sajovich about the best way to ask for and to get sellers to accept your request for concessions to help with closing costs. Sajovich said that having an experienced REALTOR® or agent on your side can really be helpful because they know the market and what’s common. For example, take the scenario we talked about earlier where a buyer has to pay a higher price to get their offer accepted.

“In our current market, the best way to ask for and receive a seller concession is to have your agent scour the recent sales for similar comps (comparable properties) that have closed with seller concessions,” she said. “This can help offset the higher purchase price many buyers have to offer in order to get under contract.”

By having the seller pay for certain items in your closing costs, it enables you to make a higher offer. Therefore, you’ll effectively be paying your closing costs throughout the life of the loan rather than upfront at the closing table because they’re now built into your loan amount. This can save you from having to spend a ton of money just to get in the door.

Your agent may also have insight into just how motivated the sellers are to move. If they need to get rid of the home, they may be more willing to work with you on concessions than a seller who can afford to wait for the best possible offer.

Stand Out By Covering Closing Costs

However, you might also save money by taking the opposite tack.

Although seller concessions can be nice, there’s a flip side: Sellers are often motivated to work with the prospective buyer who has the cleanest offer with the fewest strings attached.

For example, if you’re in a situation where there are multiple bids on the home, it may actually work to your advantage to have a lower bid but the ability to pay for your full closing cost, rather than to have a higher bid with concessions included.

“We are pretty lucky in our area because, even though we are in a low inventory seller’s market,” Sajovich said. “It is common for sellers to pay for the title insurance policy and to split closing costs. In multiple offer situations, many buyers’ agents don’t realize that the buyer could cover these costs, which puts money in the sellers’ pocket without increasing purchase price and running the risk of having the appraisal come in low. This is where I often see that an offer price that is $2,000 or $3,000 less than any other offer can still get the house.”

Because a lender can’t lend you any more than the home is worth, a seller may actually benefit if you don’t offer more because you’re lowering the risk of the deal falling through later on. If you pay the closing costs for yourself, it makes it that much sweeter.

Источник: https://www.quickenloans.com/learn/who-pays-closing-costs

Home Closing Process for Sellers in California: What are the Costs?

Home Closing Costs for Sellers in California Explained

Attention all California home sellers – we’re here to help you quickly and painlessly understand how the home closing process works in California and what costs you should expect to incur. In this article, we’ll cover the following questions:

  • How does closing on a house work?
  • How much are closing costs?
  • Who pays for closing costs?
  • What are the common closing costs for sellers in California?

How Does Closing on a House Work?

Imagine Jim is selling his home in California (hurray!). He bought a property for $300K and ten years later is selling it for $500K. Great turnaround, Jim!

He is finally ready to close on the property, meaning that all money and documents are ready to be sent so that Jim can transfer ownership to the new buyer and receive the money.

The closing of Jim’s property is facilitated by a third party escrow company to make sure all of the documents and monetary funds are transferred safely.

Jim is ready to walk away with full pockets… but not so fast, buddy.

Like so many others, Jim is under the impression that the home closing process for sellers is as simple as receiving an offer and walking away with a sweet ROI.

In reality, there are several closing costs that sellers will incur during the final sale (closing) of their property.

Keep reading, California sellers, to prepare yourself for the money you’ll actually be making in the real estate closing process.

How Much are Closing Costs?

According to Realtor.com, the fees paid to third parties can amount to 2%-7% of the final sale.

Jim, for example, would pay anywhere from $10,000 to $35,000.

Check out this homesale calculator to help determine the costs around your specific situation.

Who Pays for Closing Costs in a Real Estate Transaction?

The contract drawn up around the purchase will determine which party incurs which closing costs (buyer or seller).

In the state of California, however, there are different county standards that determine who pays which closing cost.

For example, in Alameda the buyer is expected to pay the escrow fees, whereas in Alpine the buyer and seller split the escrow fees. Discover the division of closing costs by county in California so you can anticipate what you’ll be expected to pay.

What Are Common Closing Costs For Sellers In California?

Regardless of whether you decide to sell your home through a real estate agent or go about it FSBO (for sale by owner), there are mandatory closing costs associated with the sale of your home which includes:

  • Title insurance fees
  • Title search
  • Escrow fees
  • Transfer taxes
  • Prorations for property taxes
  • Agent fees
  • Miscellaneous fees

What Are Title Insurance Fees?

Both buyers and sellers usually obtain title insurance in the case that they incur title problems, such as forgeries, undiscovered wills, or illegal deeds.

The average cost of title insurance for a California home purchase is $544, according to ValuePenguin.

What Are Title Search Fees?

A title search must be executed in order to prove you are the rightful owner of your property and have no outstanding claims or judgments.

The official title search will usually set you back $150-$250 and can be conducted completely online.

What Are Escrow Fees?

In California, an escrow service is a standard feature of real estate transactions. The entity functions as an independent third party that holds all of the relative documents (often in the hundreds) and money in a safe place until the closing of the sale.

Our home seller Jim, the owner of the property, would transfer all the documents to the escrow agent. The agent would then hold all of Jim’s documents in one place until the buyer transfers the money for the sale. The escrow company then ultimately transfers it to the seller.

What-is-Escrow-Infographic

A rough calculation of escrow fees in California usually comes out to $2 per $1,000 of the property, plus $250. On Jim’s $500,000 property, he might pay [($500,000/$1,000) x $2] + $250 = $1,250.

Having an escrow company that allows you to e-sign and track your documents step-by-step is extremely useful for home sellers. Jim keeps all his paperwork in order using New Venture Escrow.

Check out the complete list of the documents needed to sell a home – you might want to sit down for this one!

What Are Transfer Taxes?

Transfer taxes can be imposed on home sales by county, city, and HOA. Let me explain.

The California Documentary Transfer Tax Act allows counties in California to charge 55 cents per $500 of the property value ($1.10 per $1,000). Not all counties enact this right, and the state average for California is $750.

Not all cities have transfer fees, but they can enact their own tax rates. In Berkeley, for example, the transfer tax rate is $15 for each $1,000.

HOA transfer fees can fall anywhere between $100-$400.

If Jim is selling his $500,000 home in Berkeley, a particularly expensive city, then he is susceptible to $550 + $7,500 + $400 = $8,450.

Want to avoid documentary transfer tax? In California, home sellers can seek exemptions if their home sale falls under the following categories:

  • Writings to secure a debt
  • Transfers incident to reorganizations or adjustments
  • Transfers of interests in entities taxed as partnerships
  • Transfers to or from governmental entities
  • Transfers that only reflect changes in the method of ownership
  • Transfers pursuant to divorce or separation
  • Transfers by gift or death

If you think you are eligible for an exemption, consult your real estate agent to know more.

What Are Prorations for Property Taxes?

Assume Jim moves out of his house at the end of September and the new homeowner moves in at the beginning of October.

The property taxes for that year will fall proportionally (not equally) on the two owners, meaning Jim will have to pay more because he was living in the property longer.

The daily tax amount will be multiplied by the number of days each homeowner was in the property. This number depends on the property taxes of your home.

What Are Agent Fees?

This is the amount of money the seller pays to the real estate agents involved.

Depending on the contract, the listing agent would make 2.5-3% of the final sale, and the buyer’s agent would make 2.5-3% of the final sale.

That can be up to 6% of Jim’s $500,000 property, amounting to $30,000. These fees are often split between the buyer and the seller.

What Are Miscellaneous Home Closing Fees?

Depending on the specific home sale contract, the seller can incur the following miscellaneous fees:

  • Termite inspection (~$75-$150)
  • Home inspection (~$200-$400, depending on the size of the home)
  • Natural hazard disclosure report (~$100)
  • Relevant repairs (agreed upon in the contract)
  • Home appraisal ($450-$650)

There are also the personal costs of moving furniture and goods.

Make Sure You Are in Good Hands for the Biggest Transaction of Your Life

Closing on a home is often the biggest transaction people make in their lives. Make sure you’re in good hands with a transparent California escrow company that allows you to e-sign documents and keep track of the progress of your escrow every step of the way.

Get in touch with an agent today and see how New Venture Escrow can help.

Источник: https://newventureescrow.com/home-closing-process-for-sellers-in-california-what-are-the-costs/

Who pays Realtors

Realtors get paid on a commission basis, usually 5 to 6 percent of a home’s sales price, which is split between the listing broker and buyer's agent. Fees typically come out of the sellers’ proceeds while buyers generally pay nothing to the agent who represents them.

Honestly, most folks don't put much thought into how real estate agents make money – neither the commission percentages nor from which side of the deal the fees come. Obviously, one must assume that compensation comes from somewhere, or no one would be in business. Office furniture, copy machines, and yard signs don’t pay for themselves. Usually, about the time people start thinking about buying or selling a home, they then start to wonder how real estate agents get paid.

Most buyers are surprised to learn that real estate commissions come from the “listing side” of a deal. Meaning, the fees get worked out between a seller and their listing agent when a house is put up for sale. Then when the home is sold, the seller’s agent splits the listing fee with the buyer’s agent. Thus, buyers aren’t on the hook for any costs, just the sellers. While there are some agents who will represent buyers for a flat fee or work on an hourly basis, brokerages with that kind of business model are few and far between. The most common practice is to follow the age-old commission split between the listing broker and the buyer's representative.

Splits between agents are normally 50/50, so if a listing agent procures a 6% listing fee, the buyer and seller agents will each receive 3% when the deal is done.

Real Estate Commission Example

Here’s an example of how real estate commissions work.

The person selling the home and their listing agent agree to a 6% commission. They sign a listing agreement that spells out the precise fee (as a percentage) along with the duties the listing agent should perform (marketing the property, etc.) on behalf of the seller.

Pictures of the home are taken, a property description is written, and the details of the home are uploaded to the local Multiple Listing Service (MLS). MLSs are essentially a marketplace of home inventory within a specified region. The listing is then syndicated to several portals like REALTOR.com and individual office or agent websites.

Within the local MLS, listings contain extra information that only accessible to member agents. For example, only members of an MLS can see the commission split offered by the listing agent to buyer representative for bringing customers to the table.

In the normal course of the home buying process, local buyers' agents show the listed home to their clients, one of whom decides they want to buy it. An offer is made, via a standard form called a residential purchase agreement, along with an earnest money deposit. Assuming the negotiation process, inspections, and contingencies of the deal are handled expediently, the deal proceeds to the closing stage.

During the closing, the escrow company - a neutral third party - handles all the money. The listing fee is subtracted from the proceeds of the sale, and then the remaining monies are disbursed to the companies for whom the agents work. Wait. The companies? I thought you said the listing fee splits between the listing and buyer agents? Let me explain...

So far, here are the people involved in this example deal:

  • Seller
  • Listing broker – represents seller and lists the home on the market
  • Buyer
  • Buyer’s agent – represents the buyer, gets paid from the listing broker’s commission split

In fact, there are two more entities involved. While agents are technically self-employed, they work under the licenses of their respective brokers – two additional people that get paid (one broker on each side of the deal).

Brokers and agents split the commission, based on a standing agreement between the two, typically between 25% and 50%.

Real Estate Commission Chart

Note: There's another scenario where the buy-side commission is split even further. When a real estate agent refers their client to another real estate agent (typically in another market), the referring agent is paid a referral fee, typically 25% of the buy-side commission.

Real Estate Agent Responsibilities

Listing Agents / Brokers

Legally speaking, only brokers can list homes. So, while you may work with a listing agent and agree to the terms of the deal, their broker legally holds the listing. What's more, all commissions flow through brokers, on both the buy side and sell side of the transaction. This isn’t super important to know, as a consumer, but it’s something most people don’t know and it’s somewhat interesting.

Listing agents represent their customers (sellers). Their typical fee is 5% to 6% to list and market a home. Prices are negotiable and vary by market, based on local custom. For example, homes for sale in Los Angeles are generally listed at a 5% fee. It's illegal for real estate agents and brokers to collude and fix listing fees; a practice that violates of antitrust laws.

Some discount brokers and for sale by owner (FSBO) companies agree to be paid less than the local norm for listing a home. However, low listing fees can be problematic as there is very little commission left over to split with buyers’ agents. What’s more, with less money on the table, discount brokers are less likely to spend what is required for professional photography, advertising and the myriad of other expenses needed for properly marketing and selling a home.

So just how are homes marketed? Marketing and advertising budgets are deployed the following ways.

Advertising

  • Print publications like newspapers and specialty publications
  • Personal website
  • Office website
  • International syndication (especially for luxury properties)
  • Billboards
  • Internet advertising
  • Direct mail
  • Yard signs
  • Mailers
  • Premium placement on real estate portals
  • Television
  • Social media
  • Directories
  • Telemarketing
  • Flyers
  • Yard signs

Marketing

  • Local MLS (annual membership fees)
  • Property photographs
  • Video
  • Copywriting
  • Open houses
  • Home staging

Buyer’s Agents

As explained above, agents who represent buyers get paid a portion of the proceeds of the listing fee. Buyer’s agents incur marketing and advertising expenses, too; all agents need to spend money on advertising to gain market share, attract customers and increase awareness of their brands.

Dual Agency

Agents on both sides of a deal have a fiduciary responsibility to their clients. This means agents must disclose known issues about a property and negotiate in good faith. As such, a buyer's agent must act in the best interests of their customers just as a seller's agent must represent the best interests of their clients. There may be a time when a listing agent also represents a buyer (for the same property), and this is known as dual agency.

Because dual agency makes it difficult to negotiate and represent both parties of a real estate deal, several states prohibit the practice. The State of California allows dual agency, but only if the agent or broker fully discloses it to the buyer and seller. To say the least, this becomes a precarious situation.

Final Thoughts on REALTOR® Pay

If you’re read this far, you now know how agents get paid and how commission splits work. You also know that there are more parties to the transaction than just the two agents representing the buyer and seller. Realtors incur many expenses that eat into those seemingly wonderful profits. To be sure, it's fun and rewarding profession with many responsibilities. Marketing is just the cost of doing business. Lastly, be wary of dual agency situations.

Источник: https://www.rubyhome.com/blog/how-realtors-get-paid/

Notice: Undefined variable: z_bot in /sites/msofficesetup.us/homes/does-home-seller-pay-all-realtor-fees.php on line 136

Notice: Undefined variable: z_empty in /sites/msofficesetup.us/homes/does-home-seller-pay-all-realtor-fees.php on line 136

2 Replies to “Does home seller pay all realtor fees”

  1. @CareerVidz Great video,Sir i have an interview in next 5days about “business development executive" please i need tips on how to go about it and the questions/Answers involved. Thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *