1. Real estate agent commissions
Standard commissions for real estate agents, or Realtors if they are members of the National Association of Realtors, can vary by region and type of market (whether it is a hot market where real estate agents are in high demand, or a cool one where they are competing for business). But generally, commissions equal 5–6% of the closing sale price.
The seller customarily pays this commission to his or her agent, who splits it with the buyer’s agent. There has been some disruption in this model over the last few years, however, with online companies such as Redfin opting instead to pay their agent employees salaries (instead of being commission-based) and charging property sellers just 1%.
In a hot market or area with good word of mouth or road frontage, sellers may be able to successfully sell their home without a real estate agent, but may be expected to still pay the buyer’s agent 2–3% if he or she helps them close the deal.
2. Title insurance
Title insurance is a policy purchased by the buyer of a property for him- or herself and for his or her lender, if there is one. It aims to protect both from financial damages arising from defects in title not caught before the transfer of ownership.
Title defects that were not caught are rare, but they can happen. During a title search, a title agent or attorney will look in the local land records to ensure that all liens, mortgages, or any other claims to the property are settled at the time of closing.
Title insurance policy costs vary by state, property values, and loan amounts, but run about $1,000 for buyers, according to the National Association of Realtors. Some states have fixed premiums, while others allow you to shop around. Your title agent or attorney may have a good sense of reputable insurance policies available to you and their costs. Use an online calculator to help you estimate the costs for your case.
Lenders usually require a property buyer to pay for their own title insurance policy as well. This cost would be estimated in the Closing Disclosure or Good Faith Estimate a lender is required to give you before settlement. The lender’s policy premium is usually cheaper because they need less coverage as the mortgage is gradually paid down.
3. Recordation and transfer taxes