How does agent and closing fees work?

Asked by Rabindra Shrestha, 94305 Tue Dec 25, 2007

Who pays (buyer/seller) the agent and closing fee and how much is it? I've been told that a buyer that works with the seller's (listing) agent can save on fees. Is this true and is it a good idea? Will there be a conflict of interest and limited negotiation on price?
Finally, is it recommended to work with an agent even when buying straight from a developer (not a resale)?

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Melanie Nard…, , San Francisco, CA
Wed Dec 26, 2007
Hi Rabindra,
I agree with much of what Sylvia says here, in addition we have a high transfer tax in SF county that is traditionally paid by the seller, unless you are buying in a new development (here is where a Realtor can help in negotiating with developers of new buildings), or a probate. Of course keep in mind that in real estate everything is negotiable.
A listing agent has a fiduciary duty to represent the seller -- so there is a conflict in a single agent trying to secure the highest price for a property while representing a buyer.
Just a few thoughts for you to consider.
2 votes
Sylvia Barry,…, Agent, Marin, CA
Tue Dec 25, 2007
Hi Rabindra:

You are a home buyer. In S.F. the seller pays commission to listing agent, and the listing agent will split the commission to the buyers agent as per MLS agreement (usually sellers want their home to be listed on MLS and commission offered to buyer agents so the house enjoys more exposure rather than letting listing agent has their house as 'pocket' listing).

So, as a buyer, you do not have to worry about paying commission.

I will not want to go with 'dual agency' (the agent who represents both seller and buyer), for the reason of unbiased negotiation and make sure my agent has my best interest in mind. Use 5% as total commission as an example, on a $1M house, you will probably not being able to save more than 1% fee, which is $10,000. However, if you have an agent who knows that they will be able to sell you a home that you like, whether it's this house or another one, they will get paid. They will work extra hard for you on negotiating the deal. You might be able to save 5-10% off the listing price if you find the right house, do the right negotiation. the 1% savings, if any, pales in that. This is just one example. There are many other variation on this scenario.

For closing cost, as a buyer, you will be paying for title company fee, title insurance fee, mortgage fee, points, if any, prorated property tax, insurance, mortgage, etc. The number also varies by the price point of the home / mortgage you are getting.

The best way to find out about the closing cost is to ask your agent give you an estimate on closing cost for your specific deal.

Purchasing directly from a developer or with a Realtor present, as a Realtor, i am going to say that it's best to be represented by your buyer Realtor. The reason is your agent can show you various homes, both new developments and resale homes in many areas to fit your criteria, they are not limited to one specific house or development. If the developer does pay commission to the agent (usually requires the agent to bring you in and sign you in the first time around), they will still allow you to negotiate rebates and upgrades just the same as when you are represented by the developer - they want the agents to bring buyers in. So, you will be getting the same incentive, deal, with the benefit of somebody else who represents you and watches over the whole deal with YOUR best interest in mind - and that's a really important part in buying or selling a home.

If you like, please give me a call (415) 717-0293 or email me and I can talk to you about the pros / cons and details of each and the process of buying a home. .

Sylvia .
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Greg Corvi, Agent, San Ramon, CA
Tue Dec 25, 2007
Hi Rabrinda, if a property is listed on the Multiple Listing Service, the seller has a signed contract with the listing broker to offer an agent representing a buyer a commission. This is typically a percentage of the final sales price. They also have signed the contract which states how much of a commission they will pay the listing broker(representing the seller). Sometimes, the contract will state if the listing broker also represents the buyer, the commission paid by the seller will be less, but sometimes it is still the same whether the listing broker represents the seller and the buyer. So, if it is the former, the net to the seller may be more if the buyer is represented by the listing agent, but again, this is not always the case. Regarding fees, e.g. closing costs, those are negotiable in the contract, so I don't see where the buyer will be saving on any fees unless the agent representing the buyer negotiates them for the buyer. This leads to one of your points about any "conflict of interest". The seller has signed a contract with the listing broker who has a fiduciary duty to represent the seller's best interests. Some could argue that there may be a conflict of interest when an agent represents both because the listing broker knows the seller's bottom line and must get the best for the seller. An example often used to support having your own representation is that if you were going to court, you would want your own attorney, not the attorney from the other party.
I am of the belief that you should always have your own agent who knows exactly what you want and to represent only your interests. This would go even if you are buying from a developer, an agent who has represented buyers in transactions with developers, has the experience and can negotiate to get you more than you may even know. Hopefully, this helps...good luck!
1 vote
Tue Dec 25, 2007
Rabrinda, some brokers will pay all closing fees if you already have a property picked out and use them to represent you. Hint Hint.
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