Do Closing Costs Include Realtor Fees?
As a home seller, you may wonder: Do closing costs include Realtor fees? We clarify this separation and what agent commissions you can expect to pay.
If you’re making plans to sell your home, it’s likely you’re calculating your closing cost expenses so you can estimate your final proceeds. A common question many sellers ask is: Do closing costs include Realtor fees?
While closing costs and Realtor fees are both part of selling a home, they are separate expenses that cover different aspects of the transaction. What’s more, a recent court settlement has changed the way Realtor fees are handled and who pays them.
In this guide, we clarify the separation between closing costs and Realtor fees and provide examples of how much you might pay in agent commissions.
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Do closing costs include Realtor fees in a home sale?
The short answer: No, closing costs do not typically include Realtor fees.
Closing costs refer to expenses associated with finalizing the sale of a home, such as title insurance, escrow fees, and transfer taxes.
These are separate from the commission paid to the agents involved in the transaction. Realtor fees, or commissions, are paid directly to the agents and are usually calculated as a percentage of the home’s sale price.
However, both closing costs and Realtor fees come out of the proceeds from your home sale, so they’re important to account for when determining your net profit.
What are Realtor fees?
Realtor fees, also called commissions, are compensation paid to real estate agents for facilitating home sales.
Historically, the combined fee has been around 5%–6% of the home’s sale price, with the seller paying both the listing agent and buyer’s agent commissions. The two agents would then split the money and pay their brokerages a percentage. However, this traditional model is changing.
A recent court settlement by the National Association of Realtors (NAR) has decoupled Realtor fees. Under the new commission rules, buyers are now responsible for their own agent commissions. This means that under the new model, sellers are paying about half of what they used to pay in Realtor fees — unless they offer to pay the buyer’s agent commission as part of the home sale. (More on this in a minute.)
