Jim Valentine: By Jim Valentine
Jim Valentine on real estate
There are a myriad of costs associated with a real estate transaction and it’s good to know who pays for what along the way.
There are customary practices in most cases, but everything is always negotiable, always. Occasionally, however, circumstances arise which lead to an unconventional cost allocation. It is good that you know what is normal and what is modified to put something together. Overall, how are you affected?
Let’s start with the selling costs, the commission. Traditionally, it is paid by the seller to the listing agent who shares it equally with the selling agent. The cost breakdown is listed publicly so that agents know what is available to them for the sale of the house. The amount should not affect the properties presented to a prospect, the public statement simply serves to inform the sales agent of the fees to be included in their contract.
Buyers should understand that they do not pay cash commission in such circumstances, but it really comes at a cost to them as it affects the bottom line of the seller and will influence their decision making process. Buyers can work with a buyers brokerage contract and pay their agent for their services. It is important to realize that paying a sales commission does not change the performance. Agents will represent the buyer or the seller or both depending on what their actual employment relationship is, and not by compensation.
The three most common closing costs are title insurance, escrow, and transfer taxes. There are two types of title insurance, the owner’s policy and the lender’s policy. Historically the owner has been a 50/50 split, buyer / seller in Douglas County, but this has evolved over time until the vast majority of transactions are paid by the seller. This has always been the case in other counties in northern Nevada. Lender’s policies are paid by the buyer / borrower. There is no need for a cash transaction. Escrow is typically split 50/50, as is the Real Estate Transfer Tax (RPTT) since the legislature tripled the tax a few years ago.
Inspections are usually paid for by the buyer, but sometimes this is an area where negotiations take place. One of the most common negotiations is the septic system. There are three related costs: locating, pumping and inspecting the tank. Many buyers want the seller to pay for the pumping out of the septic tank, to take away what was theirs.
Not all transactions have all inspections. Water quality can go either way, buyer or seller. Physics and pest control are usually paid for by the buyer, unless it is a VA loan, in which case the seller is required to pay the $ 125. From time to time, specialists are called upon for a specific situation, for example roofing, radon, etc. These costs are generally the responsibility of the party concerned and / or beneficiary. Who pays is to be agreed.
The costs of the loan are almost always paid by the borrower, the buyer. If you have owner financing, document preparation, collection, and other costs must be paid. Sometimes it is split, other times it is negotiated with a party who pays for the benefit they receive, that is, they can buy the property. Repairs can also be the subject of a negotiated allowance based on the amount each party receives, i.e. by dividing the cost of a new roof needed for the benefit of both parties. Polls, government statements, etc. all cost money that someone has to pay.
When it comes to who pays a cost along the way, the logic of who benefits from the expense usually dictates a course of action. If it is the two parts directly, divide it. If one gains in comfort or in confidence, it can go both ways, i.e. whoever seeks comfort can pay for comfort, or the other party can pay to bring it up to date. feel comfortable and stay in the business. Whatever the circumstances, be sure to look at the cost from a broader perspective of the transaction. Don’t stumble over dollars to save a dime.
There is a lot of emotion and goodwill in real estate transactions, but most people focus on the money. Remember, when you are working towards your goal, it might help you get there.
When it comes to choosing professionals to support you in your real estate needs… Experience is priceless! Jim Valentine, RE / MAX Realty Affiliates, 775-781-3704 or [email protected]