Who Pays Closing Costs When Selling a House By Owner?
In most FSBO real estate contracts, both buyers and sellers pay a portion of closing costs, but negotiations can lead one side to pay more.
Selling your home without a real estate agent may save you money on commission fees, but it doesn’t eliminate closing costs. All the standard closing fees that apply to agent-assisted sales also will apply to a For Sale By Owner (FSBO) transaction — except for the agent’s commission. Additionally, if the buyer has an agent, the seller may be responsible for covering part or all of the buyer’s agent commission.
Who ultimately pays the closing costs depends on local customs and the specifics of the negotiation process. For instance, if the buyer is well-represented by a strong agent and the seller has no representation, the seller might find themselves covering a larger portion of the closing costs than they anticipated.
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Buyer’s agent fee
Since August 2024, there have been significant changes in how real estate commissions are structured. Previously, the seller typically paid both the listing agent’s and the buyer’s agent’s commission, with the buyer’s agent fee typically ranging from 2.5% to 3%. However, under the new rules, the buyer is now responsible for negotiating and paying their agent’s commission directly. This change was made to increase transparency and competition in the market, potentially lowering the overall cost for buyers.
As a result, the commission fee for the buyer’s agent is no longer automatically included in the seller’s closing costs. Buyers must now negotiate their agent’s fees, which may be based on a flat rate, an hourly fee, or a percentage of the sale price. This shift encourages a more competitive environment and could result in lower commissions or more flexible fee structures as buyers have more control over their agreements
FSBO with a known buyer
A higher proportion of FSBO sales tend to be between buyers and sellers who already know each other. In 2024, 38% of FSBO sellers chose to sell their home without an agent because they were selling to a friend, family member, or neighbor. And 30% of sellers went the FSBO route to avoid paying commission fees.
When this happens, both the buyer and seller typically hire attorneys to handle the paperwork and close the deal, without real estate agents involved. With the new commission changes introduced in August 2024, the buyer is now responsible for negotiating and paying their agent’s fee directly. This can result in the seller saving the full 3% to 6% commission that typically would be paid to both agents in a traditional sale.
When you need to find a buyer
If you’re selling FSBO and don’t already have a buyer lined up, you may wonder if offering to pay a buyer’s agent commission — typically about 3% — will help attract more potential buyers.
Whether you decide to offer this commission or work with an unrepresented buyer is entirely up to you as the seller. However, refusing to pay the fee could limit your buyer pool, especially since buyers are now more responsible for negotiating and covering their agent’s fees under the recent commission changes. While buyers may still be willing to work with you without an agent, offering compensation for their agent may increase your chances of attracting more serious inquiries.
Why buyer’s agents want a fee
Buyer’s agents typically expect compensation for the work they do in securing a sale, such as arranging showings, qualifying buyers, and guiding them through the process. Traditionally, the seller has paid this fee, and this arrangement is still common in many markets. However, following the commission changes this year, buyers are now more responsible for negotiating and covering their agent’s fees, which could shift the dynamics.
As a seller, you have a few options: You can offer the typical 3% buyer’s agent commission (still saving on the listing agent’s fee), negotiate a lower percentage or flat fee, or choose to offer no buyer’s agent commission at all. While offering no commission could save you the most, it may result in a longer time on the market and fewer buyers. Keep in mind that buyer’s agents may be less motivated to show homes that don’t offer compensation for their efforts.
“One major advantage of having an agent is finding a buyer,” says James R. Rhyne Jr., owner and real estate attorney at Rhyne Law Firm, who handles one or more FSBO transactions per month. “You can hire an attorney to help you with the contract — but I can’t help you list your property. Most of the FSBOs who come to me already have a buyer.”
Seller FSBO closing costs
Other than the optional buyer’s agent commission, sellers in a FSBO transaction should expect to pay:
Pre-listing appraisal ($400-$600): It’s not required, but without access to an agent’s comparative market analysis, a FSBO may find it useful to order their own pre-listing appraisal for the purposes of pricing their home accurately.
Seller’s attorney fees ($150-$500 an hour): Not all states require sellers to hire a real estate attorney, but FSBO sales warrant legal and professional oversight of some kind to avoid an abundance of legal risk. An attorney will review and prepare key documents and make sure paperwork, such as the seller’s disclosures, is filled out properly.
Transfer taxes (0.1%-5.0%): Many states and municipalities levy taxes for the transfer of property from one party to another. Currently, 13 states do not charge any transfer taxes. This fee often falls on the seller, but customs can vary by state.
Property survey fees ($200-$1,200): Unless you already have an up-to-date copy, you may need to pay a surveyor to create a land or property survey serving as a legal document of the topography and boundaries of your entire property as part of the record of the sale.
