Is the closing cost paid the same way in every state?

Question

Good Day BP community!

I hope everything is doing great. So as the title entails, we have a question about the closing cost of a property. Today I was talking to a friend of mine that used to work as a real state agent, and I asked her about the percentage of closing cost in Buffalo, NY. And she said I did not need to worry about it as a buyer, that the seller covers it. And used this example:

“If you buy a house for 100,000, 3% out of that 100,000 goes to buyers agent, 3% percent out of that goes to sellers agent. So the seller then proceeds on 94% of the sale price.

Sale price:

Buyers agent commission: 3,000

Sellers agent commission: 3,000

Seller proceeds: 94,000

It’s not an additional fee, it’s included in sale price and that’s how it works everywhere.”

So we’re just wondering how accurate that is? Because from what we’ve read in books and learned from Brandon’s webinars. The buyer pays the closing cost, which is usually 1-2% of the purchase price.

Thanks,

The Brothers

Steve Morris · Answer

In OR, MLS usually has a number for BAC which I would put into the PSA if I'm writing an offer.  Most of the times it's 50% of total comm, but I've dealt with some shady brokers that don't like it when I write my comm as 50% instead of a number.

Juan Carlos · Answer

@Steve Morris Thanks for the clarification! As @Kyle J. mentioned, it is part of the closing cost. That makes sense!

In regards to the buyer's agent commission, is that something an agent discloses out front or is that something you negotiated once an offer has been accepted?

Kyle J. · Answer

@Juan DiazGarcia  No such thing as "that's the way it works everywhere" when it comes to real estate.  There's just to much variation between state-to-state, and even within local markets in the same state.  Plus, everything can be negotiated.

As one example, in your area, you say real estate commissions are 6%.  In mine, 5% is more common.  Also, I've typically seen closing costs split 50/50 between the buyer/seller in normal retail (non-distressed, MLS) sales.  However, in off-market/distressed sales where the buyer is often getting the property at a good discount already, I've often seen the buyer willing to pay 100% of closing costs.  Point is, everything is negotiable.

And then you have the issue of what the closing costs even consist of.  Could be escrow fees, attorney fees (except my state doesn't even use attorneys so there's another variation), transfer tax, loan origination fees (wait, what if you're buying with cash?), etc.

Point is, there's no such thing as "that's how it works everywhere".

Steve Morris · Answer

Well, think you mean commission and not closing cost (which are different).

Usual/custom is commission comes from seller proceeds and that listing brokers co-op on fees.  However:

1) Lots of listing brokers want both sides and will do the min to co-op

2) If a listing broker is a dual agent, if I'm the buyer I'd negotiate his comm down and get a credit since it won't affect seller net

3) I've had deals where buyer pays my fee, so there's that.