For Sale By Owner: Who Pays What?

There are many transactional costs included with purchasing an FSBO home. Here, I will help you better understand what to expect regarding who pays what. Also, as a real estate agent I can advise you one where you should negotiate to shift the responsibility to pay to the other party.

Who Pays Real Estate Commission

It is important to know who pays commission on for sale by owner home purchases. To answer that we first must answer the first question of is there even a real estate commission to pay.

A home seller selling their home for sale by owner does not have a real estate agent. Therefore, there is no commission for the seller to pay. However, there is an exception which does occur relatively frequently.

Oftentimes a real estate agent will contact a FSBO home seller and let the seller know the agent has a client who might be interested in the property. The agent will likely ask the seller if he or she is offering a commission to an agent who brings a buyer. The seller can agree to or reject paying a commission to the agent.

In the case the seller refuses to pay a real estate commission to a buyer’s agent the buyer’s agent will ask the buyer to pay a commission for their services.

Does The Buyer Or Seller Pay For The Home Warranty

First, a home warranty is not guaranteed. If a home warranty is being advertised with the home sale then the seller is likely paying for the home warranty. However, if a warranty is not being advertised with the home the buyer will need to negotiate for one when making an offer. In that circumstance the buyer could negotiate that the seller pay for the home warranty.

Does The Buyer Or Seller Pay The Cleaning Fees

The responsibility to pay any fees for cleaning the property will need to be negotiated between the buyer and the seller. FSBO sellers are not required to deliver the property to the buyer in spotlessly clean condition. Buyers and FSBO sellers should be very specific in their documents so all sides have a clear understanding of how the home should be delivered to the buyer.

Does The Buyer Or Seller Pay For The Land Survey

The responsibility to pay for a land survey is something which is negotiated in a home purchase. Therefore, it is on a case by case basis who will pay for a land survey. Most often it is the party who is requesting the survey be completed. So, it is often the buyer who pays for a survey.

Who Pays Real Estate Closing Costs

Without additional negotiations the default position is each side pays their own respective closing costs.

Seller closing costs include property tax prorations, title fees, document preparation fees, and the cost of a title insurance policy. Buyer closing costs include their own title fees and fees related to their loan if there is one. Loan fees paid at closing include loan production fees, credit reports, and a lender title insurance policy.

Buyers and sellers can negotiate a different outcome. More often a seller pays some or all of a buyer’s closing costs versus the other way around. Regardless, buyers should not go into a transaction headstrong that the seller must pay their closing costs.

Does The Buyer Or Seller Pay For The Home Inspection

Home inspections are almost always paid by the buyer. This is because it is the buyer who hires the inspector. Therefore, it is the buyers expense to pay. Additionally, the buyer will owe this cost regardless of whether or not the property closes.

Does The Buyer Or Seller Pay For The Appraisal

If the seller is getting the appraisal to provide additional evidence to support the listing price the seller will pay for that appraisal. However, if the buyer is getting a loan which requires an appraisal to occur the buyer must pay for the appraisal. Also, in the case of a cash purchase if the buyer chooses to have an appraisal the buyer will pay for it.

Does The Buyer Or Seller Pay For Title Insurance

Almost always the seller will pay for an owner’s title insurance policy. A buyer will purchase and pay for a lender’s title insurance policy if the buyer is getting a mortgage to buy the home.

Who Pays Real Estate Transfer Tax

Usually the seller pays the entire cost of a state or local government transfer tax. There are some limited exceptions to this, though. One striking example is real property located in Chicago city limits. Chicago homebuyers are required to pay $3.75 per $500 of transferred property. Your real estate agent or attorney can help you better understand state and local requirements specific to your area.

Conclusion

The responsibility to pay for the various transactional costs in a real estate purchase can be negotiated. However, there is a default setting for each of these. Regarding optional items like a warranty, professional cleaning, or a land survey, usually the party requesting the item be included will be paying for that item. This again unless the responsibility to pay is shifted to the non-requesting party through negotiations.

If you have more questions about who pays what when purchasing a FSBO feel free to contact me. I am a real estate agent and would be happy to answer your questions. You can use the contact form below.