Fees: What You Should and Should not Pay in a Real Estate Transaction

February 17, 2014
By: Sarah Boha

Have you ever reached the end of dinner with a group of friends and wondered, “Should I pay for this”?  The aforementioned circumstance ponders the etiquette of paying a check at dinner.  In the buying and selling of real estate, you don’t have to wonder who foots the bill for commissions, the home inspection and appraisal, if you familiarize yourself with an agreement of sale, buyer’s agency contract and the HUD 1 settlement statement form.  Regardless of whether you’re currently considering buying or selling real estate or if you have bought and sold a home in the past; it is imperative to know your rights as a consumer to be aware of what you should and should not pay or be obligated to pay on either side of the transaction.   

For the Seller

The seller of real estate will pay the listing and buyer’s agent commission.  As negotiated into the agreement of sale, the commission is represented as a percentage of the agreed price of the home and shared between the listing and buyer’s agent.  Make note, the commission of a real estate agent in the state of Pennsylvania is negotiable.  Sellers may also have to pay the balance of their property taxes if they haven’t already done so.  

For the Buyer

The buyer of real estate will incur fees mostly in association with their mortgage.  Once they find the home most suited for them, buyers should expect to pay for the following common closing costs; an appraisal of the property, a home inspection (if the buyer does not waive), pest inspection (if they buyer does not waive), title insurance, down payment, loan origination, property tax escrow, deed recording, private mortgage insurance (if needed). 

Buyers and Sellers, Be on the Lookout

As mentioned above, these anticipated fees respectively for buyers and sellers are the most common.  Both buyers and sellers should be leery of “administrative fees” or “flat rate commission fees” on top of an already agreed upon commission.  Unless, the agent discloses how the added fee is being used, they can’t legally charge you -- Remember, commissions are always negotiable.  If as a consumer you feel you may be pressured into paying a fee that is not directly tied to the services you’re receiving and the purpose of the fees aren’t being completely disclosed to you; it is your right to question it.  Added fees also need to be disclosed in section 700 of the HUD 1 Settlement Statement.

Buying a home should be an exciting life event and selling your home should be a smooth process with the right agent.  Be a wise consumer, ask questions and never sign a contract until all fees and practices are explained completely to your understanding.