Is Realtor Fee Included in Closing Cost?

Real estate transactions involve financial obligations for both parties. Understanding these costs is important for anyone buying or selling a home. They contribute to the expense of transferring property ownership.

Understanding Realtor Fees

Realtor fees, commonly known as commissions, compensate real estate agents. These fees are structured as a percentage of the home’s final sale price. The average commission falls between 4% and 6% of the sale price, divided between the listing agent and the buyer’s agent. For example, a home sold at the median U.S. price of $369,100 could incur over $20,100 in total fees.

Traditionally, the seller pays the commission for both their own agent and the buyer’s agent from the sale proceeds. This commission is deducted directly from the sale price before the seller receives funds. Commission rates are not fixed by law and are always negotiable between the agent and client. Factors like local market conditions, agent experience, and the scope of services provided can influence the negotiated rate.

Understanding Closing Costs

Closing costs are fees and expenses paid at the end of a real estate transaction, distinct from the down payment. These costs cover services required to finalize the sale and transfer property ownership. For buyers, closing costs range from 2% to 5% of the home’s purchase price. Sellers often face higher closing costs, ranging from 8% to 10% of the sale price.

Common closing costs for buyers include:
Lender fees, such as loan origination fees (0.5% to 1% of the loan amount) for loan processing.
Appraisal fees ($300 to $600) paid to determine the property’s fair market value.
Credit report fees.
Title insurance premiums.
Escrow fees for managing funds.
Recording fees charged by the county to register the new deed.
Prorated property taxes and initial homeowners insurance premiums.

For sellers, common closing costs include:
Transfer taxes, levied by local governments for property transfer.
Attorney fees, where applicable.
Owner’s title insurance policy, protecting the buyer from future title claims.
Homeowners association (HOA) transfer fees.
Prorated property taxes, covering the period they owned the home up to the closing date.

How Realtor Fees Relate to Closing Costs

Realtor fees are a financial component of a real estate transaction, but they are not itemized as “closing costs” on the Closing Disclosure (CD). While both are paid at closing, they are technically separate expenses. The Closing Disclosure is a standardized document detailing all loan and settlement costs.

For sellers, the realtor commission is deducted directly from the sale proceeds before net funds are disbursed. It appears on a separate line item or statement, such as a seller’s closing statement, rather than being grouped under “closing costs” on the CD. The seller’s Closing Disclosure will show the commission as a debit.

On the buyer’s side, commissions for the buyer’s agent have traditionally been paid by the seller. Therefore, these commissions do not appear as a direct cost to the buyer on their Closing Disclosure. For legal and disclosure purposes, realtor fees are treated distinctly from other itemized closing costs.