Who Pays for What in Real Estate Deals?

New to Real Estate? Not sure who pays for what in the deal? Here’s a simple guide to help you understand the basics. Buying or selling property in today’s litigious world is a daunting task.  With so much real estate jargon, buyers and sellers can be confused when trying to complete a transaction.  I had an old Jewish diamond broker once tell me with a wink, “Everything’s negotiable.”  That’s certainly true in real estate.  So here’s a simple breakdown of some of the costs involved and who pays for what.

Your agent will provide you with a buyer’s sheet that lays out the closing costs, and by federal law you must receive what’s called a “good-faith” estimate of your closing costs from any lender you use.

As for who pays the closing costs, that’s where your negotiating skills (or your Realtor’s) come into play. There is no cut-and-dried rule about who—the seller or the buyer—pays the closing costs, but buyers usually cover the brunt of the costs (3% to 4% of the home’s price) compared with sellers (1% to 3%).

Real Estate Commission

By far the biggest expense in a real estate deal is the realtor’s commission. While there is not a set percentage in any market–and indeed is illegal for brokerages to try to fix these fees in their market–most agents charge between 5%-7%.  Most of the time, this cost is paid by the seller, so buyer’s are off the hook for this one. All the more reason for buyers to sign a buyer’s rep agreement with a reputable real estate agent; they get all their expertise and negotiating skills for free.

The realtor fees are split between the buyer’s agent and the listing agent, with the brokers taking a percentage of each agent’s commission. In large franchises like Keller Williams and Coldwell Banker, a portion of the commission is paid to the franchise. If the deal was procured by another agent or referral company, then part of the commission is paid to them–as much as 25-35% as a referral fee.

So while the seller may chaff at the idea of lopping off a chunk of their net proceeds, they need to realize that their agent doesn’t normally walk off with a small fortune.

Title Policy

The title policy is a type of insurance that is normally paid by the seller to the title company to make sure that the property they are selling has a “clean title.” This is an important step to make sure no lawsuits are forthcoming. This usually costs about 1% and can be paid by either party.  Always close deals with a reputable title company like Security Title  Courtney Hayden is who I normally close with–so professional and thorough! Another good one in this area is Bay Area Title Company    Heidi Martinez is so helpful and always answers my “dumb questions.”

Property Taxes

Like death, TAXES are inevitable and you can be sure Uncle Sam will be at the title company with his hand out. The property taxes are prorated–that means the seller pays for the portion of the taxes incurred while they owned the property and the buyer pays for what portion of the year’s taxes that they will be owning the house.  If they are financing the property, this prorated tax will be rolled into the mortgage.  If the seller owes back taxes, they will have to get current, and their taxes, current and late, will be taken out of their proceeds at closing.


Unless the seller has a relatively current survey, a mortgage company will usually require a new survey to be done. Depending on the complexity of the property, existence of a pool and/or out buildings, the price is usually less than $500. Usually the prospective buyer will ask the seller to pay for this.  Even if the buyer is paying cash, and there’s no lender involved, I recommend that buyers either get a recent existing survey from the seller or pay to have a new one done.

Origination Fees

This a cost that the mortgage company charges for setting up the loan and usually runs between 0.5% – 1.0% Since the buyer is the one securing the mortgage, they pay this and any other fees required by their lender.


This one can be a sticky wicket!  A licensed appraiser evaluates the house or land according to the condition, size, location and market condition.  I have been pleased with the services of Mona Singleterry

If the appraisal comes in less than the selling price, there’s a dilemma.  Either the seller can lower the price to the appraised value or the buyer can fork over the difference in cash or the deal falls apart.  If the real estate agent or the seller disagrees with the appraised value, they can pay for another one to be done. If they want, they can write a letter of appeal and hope to have the amount adjusted in their favor. The appraisal is done and paid for well before closing.

Home Warranty

This is a special type of insurance policy that covers the major home systems like plumbing and air-conditioning and even appliances. This is sometimes offered by the seller as a concession to the buyer and costs about $400-$500+ depending on the coverage and deductibles.  This is optional but recommended.

Some good ones are Chase McRoberts at  First American and  Bethany Fawkes at Fidelity National but there are lots of other good ones to choose from.


In areas near the ocean like the South Texas Coastal Bend, lenders usually require windstorm and flood insurance in addition to a regular homeowner’s policy. These can cost about 3-4% of the total cost of the home and are rolled into the mortgage.  If a buyer is paying cash, they can choose not get these additional policies and hope that Mother Nature shows mercy. Good luck with that!


Private Mortgage Insurance is charged when a buyer pays less than 20% down on the property when using a conventional loan.  It can cost between .3-1.5% of the loan’s value.  It can and should be cancelled when the buyer’s outstanding loan value drops below 78%.

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Even though most real estate agents check the “as is” box on the condition of the property, all buyers–even cash buyers—should do their due diligence when it comes to property condition.  This means hiring a professional licensed home inspector to go over that place with a fine-toothed comb–even if it’s brand new. Depending on the size and age of the property, this can run $350-500+.  Do not skip this step! 

After checking the roof, the foundation, electrical, plumbing and a myriad of other items, some inspectors will recommend getting additional inspections.  These might require the services of an HVAC technician, a foundation expert, a plumber (for hydrostatic test)  or a structural engineer.  These inspections are not cheap but could save a buyer thousands of dollars in the long run or prevent them from buying a bad property that’s not even fixable.

In addition to a basic home inspection, a buyer should hire a qualified pest inspector to check for the presence of or damage by wood-destroying insects like termites.  This usually costs less than $100 and well worth the peace of mind.

In the event that major defects are discovered during the Option Period (time between the offer is accepted and the closing), the buyer can request that the seller pay for some of the needed repairs.  Or they can reduce the price to cover the cost which I recommend because it is simpler to do and lenders usually prefer this option.

Sometimes the lender will require some repairs to be done as a stipulation for making the loan.  This is especially true when buyers are financing through the Veteran’s Administration as their standards are more stringent than other types of loans.  They will usually send their own inspectors and appraisers to evaluate the property.

If the buyer can not be satisfied with the solution offered by the seller, they have the right to kill the deal during the option period.

Other Fees

There are other charges incurred in a real estate transaction: recording fees, couriers, notary, document preparation fees and others.  These vary and usually can be negotiated.

Other Lingo Defined

This is by no means an exhaustive list of terms related to a real estate transaction.  Here’s a link to some other potentially confusing jargon:

Be Aware of the Costs

Even the Bible warns of the danger of failing to count the cost before embarking on a building project.

There are lots of costs associated with buying or selling property and as in any situation, consumers need to educate themselves in advance, so that there’s no surprises at the closing table. 

Who Can Help?

Always direct your question to the expert in their particular field.  For example, when you have title or closing questions, ask your escrow agent.  If you have mortgage issues or concerns, consult your lender.  Your real estate agent can and will answer questions about the contract and related documents. If you are still unclear about the explanation, hire a qualified attorney to explain it further.

For most people, a real estate transaction is the biggest financial undertaking of their lives.  It’s paramount to make sure you understand the language and terms of the deal before you sign anything.

Realtor Response Time

“My Realtor won’t call me back!” is a claim I often hear from people who are buying or selling real estate.   They express frustration and bewilderment as to why a real estate agent they’ve contacted either delays a call back or, worse yet, never calls back at all.  I understand their sentiments but can’t understand why this happens with such frequency.

Most Americans  check their phones incessantly throughout the day and night. In today’s hyper-technical world, instantaneous response is expected. Whether by text, call, voicemail, apps or email, people are staying in touch with their network. Since the majority of real estate agents and clients own a a smartphone, staying in contact should be very easy. It’s outrageous  that many qualified leads are lost due to delayed response time from their agent. Even more unthinkable that an agent would not have the courtesy to return a call to someone whose business they’ve already gotten. Some agents do not respond within one day.  By that time, the potential client has certainly moved on and found someone else to assist them.

According to research by the National Association of Realtors home buyers and sellers almost always do business with the first agent they meet–a whopping 72%.  Yet, many realtors don’t take that critical first step towards securing a willing buyer or seller by a lightning fast response time. Since most realtors aren’t sitting behind a desk or tethered to a landline, they can respond on the go: from their cars, their homes or even when they are out showing property.

Many real estate customers weighed in on this issue on a message forum board at Zillow.  See their comments here:

I admit I’ve purchased leads from and other similar companies, and they advised that the window of time to respond is under 15 minutes.  I once closed a $350,000 sale and got a listing for the condo they were selling because I called them back within two minutes of receiving the lead.  The seller was exasperated when he was not able to reach the listing agent within 24 hours even after she’d promised to call him back right away. I also subscribe to a referral service called where I receive text notifications of buyer leads. But the catch is I have to claim the referral within seconds or it’s gone. So turning my phone on silent when I’m awake just isn’t an option.

The importance of response time can’t be overstated.  According to

Calling a lead in 5 minutes VS 30 minutes increases the chances of converting that lead by 21X

With information so readily available at our fingertips these days, it’s no wonder consumers grow impatient at a quicker rate than they used to. As a matter of fact, a recent study by Microsoft surveyed over 2,000 adults and found people now lose concentration after 8 seconds! That’s a shorter attention span than goldfish! This tells us that leads are more perishable than ever and when people want information from an expert, they want it NOW. 

According to an article in Forbes magazine, a quick response time is listed as the number one Best Practices.

Respond quickly. Today’s real estate clients expect speedier service than did any generation before them. (Not only speedier than their parents expected, but even than they themselves expected this time last year.) As I often say, an hour represents a year in internet time; a prospective client who doesn’t hear from you the same morning or afternoon of their attempt to contact you may very well move on, on the assumption that you’re never going to get back to them

People who are buying a home are making the most expensive purchase of their lives, and they want and expect someone to care enough to call, text or email them back in a timely way to help them with the transaction. Whether they’re spending $100,000 or $1M, customers need to feel that they are important, and a timely response shows them that the agent truly cares. Realtors should respond in the same manner that they were contacted. For example, if customers prefer text messages to phone calls, agents should honor that and respond in kind.

When shopping for a qualified agent, it’s appropriate to judge them on their response time to the initial contact.  Even if one agent has more experience, the one who calls you back right away may deserve your business. Just because they’ve had more years in the business, doesn’t guarantee the level of respect and responsiveness that every customer deserves.  Like Og Mandino said, “Experience is often overrated; usually by old men who nod wisely and speak stupidly.” Don’t overlook those younger or less experience agents. Often they have more time to devote to you and are hungry –they’ll work harder to earn and keep your business.

If an agent can’t call you back, they can at least text an acknowledgement of the call with a promise to call back within a certain time.  Some lead generation sites, like Zillow have a feature where an automated email is sent immediately. And certainly every professional agent should have a clearly spoken voicemail greeting stating his or her name and company affiliation with assurance of a prompt return call.

It is unrealistic for customers to expect their agents to be on call 24/7, but smart agents realize that their workdays are not 9-5.  Spouses, friends and significant others who have a real estate agent in their lives come to expect constant phone calls and texts that interrupt social and family events. So agents must prioritize their time and realize that they can’t always get back to their customers and clients immediately.

Since I’m a night owl, I have no problem answering calls, texts and emails after 10 p.m.  I once made a sale because I was awake at midnight when my client had questions about a property.  I got up, got online and found the answers to his questions.  Not only did I make a client for life, I also made a friend.  Turns out, he’d already met with several other agents. When I asked him why he chose me, he simply said, “Lisa, you always go the extra mile for me.”

So why do agents not respond in a timely way?  The most common answer is–“I’m busy.”  Successful agents are constantly looking at properties online, running comparables, crafting listing presentations, showing properties and doing the mountain of paperwork this business requires.  At some point, if the agent is too busy to respond to incoming communication, maybe it’s time to hire an assistant.  Some agents are turning to virtual assistants–staff they hire in other countries that help them with paperwork and other duties so that they can devote their time to the most profit-generating aspects of their business.

Some agents only work part-time, devoting the majority of their day to another profession.  It is understandable why they do this since making a good living as an agent in a competitive market is very difficult, especially for new agents.  Others are not tech-savvy and have a difficult time managing apps, emails, texts and phone calls simultaneously.  It is a difficult juggling act at times and takes instruction and practice. But the results are well worth it: customers and clients who feel valued become loyal advocates.

Sadly, some agents  are just unprofessional or lazy.  That’s a harsh judgement, but unfortunately a few bad experiences with real estate agents taints the reputation of the rest of us.  In a personality driven, commission-based business, it’s unthinkable that agents are unresponsive.

Some agents don’t return calls because they don’t want to deal with a customer who’s “just looking” or who they feel may not be a qualified buyer. They may not be qualified, but they have people in their network who are, and they’ll be more likely to recommend a realtor who answers or responds quickly.

Still others don’t respond because they feel that there’s no money to be made because the caller is looking to rent a property.  That’s short-sighted, in my opinion.  Eventually most renters become buyers, and they will remember the agent who took the time to help them lease a property.  I’ve had great experience helping renters; they become some of my strongest and most loyal advocates because they are so appreciative that I was willing to help them even though the initial payoff was small.

Besides the obvious reason that returning calls, texts and emails is good for business, real estate agents should do it because it’s the right thing to do.  It makes clients, potential clients and even other agents feel that they are valued— that their time and concerns are important.  With the plethora of automation in this field—apps, automated searches and real estate websites– nothing replaces the human touch and the courtesy of responding in a timely manner with the information requested.  A good agent conveys a sincere desire to serve, not just to make a commission and get on to the next deal.

With hundreds of agents in a highly competitive market, consumers can be selective in their choice of agents. In the crowded field of merely competent agents, choose one who demonstrates an authentic concern for customers and a strong desire to help them achieve their goals.

Choose one who shows that level of care with a lightning fast response timelike me!

Call, text or email me anytime.  If I’m awake, I’ll answer.


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