How can Real Estate Agents Charge thousands of dollars?

Question

With all the property being purchased and sold, One wonders how someone can justify charging outragous fee(s). I have purchased a home, and my alledged closing costs were almost 8,000.00!
Now either I am in the wrong profession, or someone is really making more than anyone else. Can someone explain it to me?
Is there any laws concerning what can and cannot be charged?
And just to think, It used to be a simple Handshake and sign one paper (a promissary note).

Answer 1

When you bought your home, NONE of the closing costs that you paid went to the real estate agent.

You paid a loan origination fee of 1%. You also probably paid points for your loan -- anywhere between 0% and 3%. You also paid half the closing fee for the closing agent, typically the title company but could be an attorney. You paid one year's worth of homeowner's insurance + 1/6th of next years estimated homeowner's insurance into your impound (escrow) account. You may have paid a pro-rata share of the propertly taxes for the current year -- or you were credited a pro-rata share, depending upon when the taxes were due and payable. You also paid about 1/3 of a year's worth of property taxes for next year into your impound (escrow) account.

There are assorted other fees that you were probably hit with; it's all explained on your HUD-1 closing statement. But you did NOT pay the real estate agent's commission. That's paid by the seller. You WILL pay it when you sell, assuming that you use an agent.

It hasn't been a handshake and a single signature on a note for over 100 years -- if ever it was that easy. At the very least there were copies of all deeds (real estate transactions MUST be in writing) as well as copies of any notes.

Answer 2

First and foremost there are ALOT of laws as to what a home buyer can pay for. Your closing costs include but are not limited to: loan origination fee, loan discount, apprasail, credit report, verification fee, bond fee, processing fee, underwriting fee, title research, attorney fees, taxes, most of these fees are charged by the Title Company, and in Texas these fees are Regulated. And depending on what type of loan you had, depends on what you as the buyer can pay for. Your REALTOR fee or commission is based on the sales price and if there are two REALTORS involved then they split the commission, in other words if the commission is 6% then they each get 3% of the sales price, BUT, depending on the agreement with THEIR Broker depends on how much money they get.
So, if a REALTOR sold a house for $80,000, and there was another REALTOR involved & the commission was 6%, the split would be $2400.....this could be that REALTORS paycheck for 2 months, depending on how long it took to close.
So if you are willing to wait 30-60 days for your money than I guess you are in the wrong profession!
And by the way the seller pays the commission!

Answer 3

Your closing costs have nothing to do with the Realtor. The Realtor gets paid from the person who is selling the house, not buying. Generally, they get 6% of the sale price. Then the fee is split between the sellers agent and the buyers agent. Then that figure is split between the agent and the agencies. In effect, the individual Realtor makes 1.5% of the sale price. Now, consider that they don't get a salary, they have to pay for their own advertising, mailings, insurance, and dues...They earn far less than you think. You may want to ask your lawyer to explain the costs to you before you jump to conclusions.

Furthermore, if you knew how much work the Realtor does, you wouldn't complain about what they get paid.

Answer 4

Closing costs consist of many fees and are different from the real estate agent's commission. You should be able to receive a detailed list of what this was from your agent. What the agents gets goes like this. You are purchasing a home and the real estate agent's commission is 6% of the sale price. The seller's agent gets 3% and the buyer's agent gets 3%. Well, 1/2 of the seller's and buyer's agent commission goes to the agent's company, unless otherwise decided. So, technically the buyer's and seller's agent each receive 1.5% of the selling price as their commission. Also, when selling a home, you can negotiate the commission, it is not set in stone.

Answer 5

Real estate agents spend alot of time and money doing their job and take significant risks in contract writing. They shield a buyer or a seller from liability. They spend hundreds of dollars advertising, on open houses, on supplies, each of those signs on the lawn is a couple of hundred dollars. In fact real estate agents often wonder if the massive consumption in time, cost, (ya know they have to pay for all of this stuff even if the buyer or seller goes with another agent. )stress and invasion of family time (as deals often go late into the night, and happen on weekends and holidays) is worth the meager salary they get after(as the first respondent said) splitting up to 6% 4 or more times. If you write a contract, taking hours you might not be the winning bid on a house, and don't get compensated for that time, even if you write 20 offers and lose out because of a competitive market. etc.etc.etc.

Answer 6

Your closing costs have more to do with the lender and the title company than the actual Realtor. The Realtor is usually paid by the person who sold the house to you. The Realtor gets a commission when the Realtor lists and sells the home to You, the buyer. And yes, if you didn't know this you are probably in the wrong profession.

Answer 7

I know ! It's crazy. I am not an agent but an investor ( I also do loans)
The amount of money on a sale is out the roof.
There are creative ways to go about it. I am selling a house I own with an auction house. They usually get market price and the buyer pays all comissions. The company has been doing it for 30 years. Nothing like a 'buy now'

Anyway, you can e-mail me if you like

Charles C

[e-mail]

Answer 8

Closing fees are not all the Agents commission. We work just as hard for a $25,000 sale as a $300,000 sale. Sometimes we work like crazy and the buyer doesn't buy and we have worked for $0. We are independant contractors who pay our taxes, both side of Social Security, insurance, MLS dues, license fees, gas, oil etc. and give half to our brokers.
It all doesn't go to us. We also have mortgages and bills at home too.

Answer 9

all fees / costs are negotiable for both sides and all parties involved.

if the realtor wants more in a commission than you want to pay, you don't have to hire him (but he also doesn't have to work for you). if the loan fees are too much, you don't have to borrow from that lender (but they don't have to lend you $$). if the title company's fees are too much, you don't have to use that title company. you could have insisted that the seller pay the closing costs (but the seller wouldn't have to sell you the house under those terms). etc.

also, you don't have to use the lender, mortgage broker, title company, inspector, etc. that your realtor may steer you to. it's always best to get an estimate of all costs up front.

Answer 10

Closing costs are not the realtor's fees. Each realtor (buyer and seller) gets a small percentage of the selling price.

Believe me, they earn their money!