August 12, 2011 May 20, 2015
Q: I am getting ready to purchase my first home and am confused as to some of the costs associated with a home purchase. What are the closing costs and who is responsible for them? Also who pays the Realtors fees? If I have a Realtor are they paid a percentage of the puchase price and is that on top of the home purchase?
If I buy from the seller’s agent do I have to pay that agent or does the seller? I am not sure how much to set aside for these cost in addition to a down payment. Thank you for all your help!
–Robin, So. California
A: Dear So. CA,
Normally the seller pays the Realtor’s fees, since there is a contract between seller and agent.
When the seller pays all the Realtor’s fees associated with selling the home..The seller pays the Realtor’s brokerage and the brokerage distributes the earned commission to all the parties involved which generally includes the buyer’s agent.
A Realtor should provide you with a buyer’s net sheet (which will include down payment money, title search, recording fees, etc.,which should give you a good idea of your money outlay. Each home purchase/home sale is different.
Then there are the times when the buyer has written into the contract that seller will pay the buyer’s closing cost up to a certain % or amount.
A: The seller always pays all the Realtors’ fees for both sides. You need a find a great realtor and have them walk you through this process – or first go to a lender and get qualified for the mortgage and have the lender explain all the closing costs – its usually about 3.5% of the sales price of the home – it includes all the cost of the bank giving you the loan and other fees like the closing agent and the recording fees and such –
You can ask the seller to pay for your closing costs – that’s why you need a good Realtor to negoitiate a contract for you …
Go to a lender first – then find a great agent.
A: If using a Realtor, ask them to explain the local sales contract, and provide you with an estimate of closing costs. Generally the fees are negotiable; however sellers
typically pay the Realtor commission fee. That being said, many companies are now charging an additional brokerage fee (up to $500 in my area) for buyers and sellers both.
All of these fees and contracts should be explained to you by your representative before you sign any agreements or legal documents.
Transfer taxes in my area are usually split equally between buyers & sellers; however in the case of a foreclosure or bank owned property, they may ask the buyer to pay both halves of transfer tax. Many of the closing costs on the buyers side are lender specific, if there is a home warranty it can be paid for by either side or cost shared, the settlement company will usually have a fee, and the taxes are typically pro-rated between both sides. The final approved HUD will include all of these fees and the closing coordinator should explain them before you sign.
You should have your own buyer representative in any case.
A: Closing costs are the miscellaneous fees charged by the lender for processing the loan, the title company for doing all the paperwork, a surveyor if needed, your local government office for recording the deed and there are taxes and/or Home Owner Associate fees that have already been paid that will need to be prorated and of course insurance. The amount will vary, somewhere between 2-8% of the price of the home but usually around 2-4%. You can ask the homeowner to chip in or if you really need help, you can ask if the closing costs can be rolled into the mortgage or get a second loan to pay off sooner. There are also some great local first time homebuyer programs that may be helpful and other programs your lender may know of. The homeowner usually pays all the Realtor fees, yours and theirs, so get your own representation. Don’t use the homeowners Realtor, they are not your representative. This is one of the biggest investments you will make so you need someone who knows and has experience in the local area that’s on your side. The fees cannot be put on top of the house price due to market value. The property is only worth want the market will allow. Your Realtor will explain all of this and give you advise and counsel you on any house that you might be interested in. Have fun!