Closing fees divided among agents, other service providers - Triangle Business Journal:

obofym.wordpress.com
million homeowners, more than at any time in according to the United Statex Housing and Urban The road tohome ownership, at leas in the past few decades, includes an hour or so spengt signing a mind-numbing stack of legal One document that probably gets every buyer's attention is the HUD-1 Settlementr Statement. Along with a good faity estimate, this page is required by HUD as a means of helpingh home buyers better understandwhat they'rde getting into, according to HUD'sw online Federal Citizen Information The HUD document spells out the various fees that are to be paid by buyere and seller at the closing - a cost that can rangs from 3 percent to 5 percent of the price of the home, says Eddie Speas, president of the Raleigh Boarxd of Realtors.
The largest component of the closing costse is the realestate broker's This fee, usually paid by the seller, is based on a percentagd of the home's selling price. At Speas' company, that percentagee tends to range from 5 percent to 7 percent of the home sale The federal government prohibits the setting of standared real estatetransaction fees. "That would be says Speas. How companies decide what percentaged to charge is based on their expenseds associated with the servicesthey provide, includinb the agent's time. "So there could be a wide rangwof commissions," Speas says.
A limited servicees firm - which basically just listss theproperty - won't be charging as while a full-service company may charge a commissiobn as high as 7 percent. That commissionh then gets split betweenthe buyer's agent and the seller's agent and their respective Buyers' agents typically earn about 2.4 percent to 3 percenyt on their transactions, covering the cost of theier time and expertise. The rest of the total fee goes tothe seller'e agent. How the commission is apportioned back to the agentd depends on the business model of the real estatefirm involved. In many cases, the fee is paid to the which then pays the agent a Speas says.
Most companies split the fee 50-5 with the agent, keeping their half to covefr the cost of agent training and othedbusiness expenses. An high-volume agent, though, may earn as much as 80 percent onthe commission, he says. Some firm s use only experienced agents and may pay as much as 90percent commission, but out of that the agent must cover a desk fee and most othet business-related expenses. "The fee pays for the agent'ds time, knowledge and expertise," says Speas. It also coverw advertising, office expenses and other costs ofdoinvg business.
"Agents are self-employed individuals working within a he says, so everyonew pays for his or her own health cellular phone bills, the cost of creating virtual home toursz for the agent's Web the cost of maintaining the Web site, "almost Stringent disclosure requirements are making it "increasinglyt more difficult to navigatr a buyer and seller through the process," Speas Buyers and sellers are payinb for the agent's knowledge to get through that trickty process. Agents also can spenc a significant amount of time with andhandling negotiations, earnest monegy disputes and other issuesw that may arise in the courser of the transaction, says Speas.
Fees chargef by relocation companies, affinity groups, real estatw Web sites, and other source s of referrals also take a chunkj ofthe agent's commission. "The site makes money by giving a lead tothe Realtor, who pays 15 to 35 percen of the referral fee back to the companyy that gave the lead," Speas "We receive business from different referral sources," says Beninwa Drake, relocation director with Caldwell Banke r Advantage. "For example, if a company is transferrinygan employee, the relocation company pays the employee'sd company a referral fee of 25 to 35 percenrt of the size of the transaction they are referring.
So, if the totao commission is 5 percent, then the listing side of the transactio would be 3or 3.6 percent, and we pay 25 to 30 percentr of that to the referrap company," she says. Affinity programs, such as those offered by American Airlineand Costco, are another source of lead s - and expenses - for real estated agents. "If one of theirt clients buys a home through a participatint realestate company, we pay 30 to 35 percent of It's just a cost of doing business." Buyers' closing costsd also include an assortment of fees paid to inspectors, title companies and, of course, escrow accounts for taxes and insurance.
These are spelleds out in the HUD-1 form and explainec on HUD's Web site. The list of fees Loan origination fee, also callex a point or points. This covers the lender's administrative costs in processingthe Generally, the buyer pays the fee, unless otherwise Loan discount, also often called point or discount points. This is a one-tim charge imposed by the lenderd or broker to lower the interest rate on the each point is equal to 1 percenrt of themortgage amount. Appraisal fee, covering the cost of an appraisal report forthe property.
Credit reportg fee, covering the cost of a credit The information in the credit reportt helps the lender decide whether or not to approve the mortgage loan and how much moneuy to lendthe buyer. Lender'w inspection fee, covering inspections made by employees of the lendee or by anoutside inspector. Thered would be a separatse pest inspection, checking for such things as termite damage, and possibly other inspections. Mortgage insurance applicationh fee, covering the processing of an application formortgage insurance. Assumptioj fee, charged when a buyer takez payments onthe seller's existing mortgage loan. Mortgags broker fee, paid to mortgage brokers.
Advance payment which include interest that accrues from the date of settlemenrt to the firstmonthly payment; mortgage insurancw premiums, covering the first year's premium or a lump sum premium that covers the life of the hazard insurance, which protects the buyer and the lenderf against loss due to fire, and natural hazards. Lenders oftej require that thefirst year'ds premiums be paid at closing. Flood if required for the would also be one ofthe 'advance payment' items. Paymentg of taxes, insurance and othef items, which are made at settlement to set up an escrow account for payment when the billcomess due.
Title charges, covering a varietu of services performed by title companies and Settlement orclosing fee, paid to the settlement agentg or escrow holder. Responsibility for paymeng of this fee is negotiated between the seller and the Abstract oftitle search, title and title insurance binder fees. Document preparation, a separate fee that some lenders or title companies charger to cover their costs of preparatioh of finallegal papers, such as a deed of trust, note or deed. Notary fee, covering the cost of having a licensed notarhy public swear that the personws named in thedocumentw did, in fact, sign them.
Attorney's fees, for services that mighty be required bythe lender, such as an examinationn of the title binder. Occasionally, the seller will agrewe to pay part ofthis fee. Governmenf recording and transfer charges. The buyer usuallyg pays the fees for legally recordinyg the new deedand mortgage. Additional which might includea survey, if require d by the lender; pest, lead-based paint and othert inspections. Certain costs may also be paid prior to such as fees for credit reportszand appraisals. For more information on closing view the HUD homebuying Web siteat .