Are you worried about the cost of using a real estate agent to help you find and buy your dream home? You might be surprised at the actual amount you have to pay out of pocket when you buy your home to cover the cost of having a real estate agent assist you with your home search and negotiations.
Real Estate Agent Basics
In every home sale/purchase transaction, there are two parties involved: the seller, and the buyer. There should also be two real estate agents involved: the seller’s agent, and the buyer’s agent.
The seller’s agent has the seller’s best interests at heart – by law! They have what is called a fiduciary responsibility to look out for the seller and help them get the best price for their home while selling it as quickly as possible, if necessary. The longer a home stays on the market, the more costs associated with it pile up, especially if the owner is paying a mortgage on it.
The buyer’s agent has your best interests at heart. They want to find you the home of your dreams, at the best price possible, on your timeline. They have the same fiduciary responsibility towards you as the seller’s agent has for the seller.
Of course, real estate agents don’t work for free. So how do they get paid, and how much do they cost?
Real Estate Agent Commissions
The commission for real estate agents is typically a total of 5% to 6%, split evenly between the seller agent and the buyer agent. If a broker is used, some of the commission may go to the broker, typically out of the seller agent’s portion.
The good news for buyers is that the seller pays the commission. This means you don’t have out of pocket commission costs. However, you will still have to pay closing costs, so be prepared for those expenses when you sign your final paperwork.
Of course, your seller may raise the price of the home to cover their expense in paying the real estate agents’ commission. Be smart about market prices and competitive bidding, and take into account that a discrepancy between the appraisal value and the listing price could be due to a seller trying to get out of shouldering the commission.
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