Understanding the Transaction Fee in a Real Estate Transaction

Understanding the Transaction Fee in a Real Estate Transaction

There is a lot of money that exchanges hands during a real estate transaction. It goes far beyond the buyer paying the seller for the house. There are multiple third parties involved in making sure that a deal gets from accepting an offer all the way through the closing. Along the way there are lots of additional fees that get tacked on to the closing costs. One of the fees that you will notice at closing is the transaction fee.

What is the Transaction Fee?

The transaction fee is the cost that is paid for the processing of the paperwork. It can be called the “administrative fee†or the “broker service fee†on some documents. These are the costs that cover the paperwork and documentation that is done throughout the closing process. The real estate broker is charging this fee to the agent, who in turn passes it on to their client. If the agent fails to charge it to their client, it is a fee that they end up paying out of their commission.

Who pays it?

The seller is the party that is going to end up paying this fee. Their agent is going to pass it along to them. While it isn’t going to be as much as what commission is to the agent, it is a noticeable chunk of money to have to pay, ranging from $295 to just over $600. If the seller is making money on the sale of their house this fee will be deducted from the total, but if they seller does not make enough to cover this fee then they will need to bring cash or a check at closing.

There are other transaction fees

As mentioned above, there are many fees that come along with a real estate transaction. Some transaction fees are related to the escrow process. This includes things like a title check, a fee to transfer taxes, and fees due to the HOA. Depending on what fees are assessed will determine who is responsible for paying them. Typically, both the buyer and seller will be responsible for a portion of the escrow transaction fees.

Additional compliance fees

Compliance fees vary based on the specific area that your house is located in. Each state can be different, as well as each city. These fees cover the work that is completed to make the house comply with the requirements of the area. It could be anything from installing carbon monoxide detectors to switching to low-flush toilets to save on water. The inspection is around $100 and typically the seller will be required to cover this expense. If it is discovered that the house is not within compliance then the seller will be responsible for making the changes necessary to correct it.

Don’t be caught off guard by the amount of fees involved when purchasing a house. Talk to your real estate agent to get an estimate on what fees you will be expected to pay and don’t forget to ask which ones are negotiable. Take the proactive approach and you might just save yourself some money.