Who Pays the Real Estate Fees: The Buyer or the Seller?

Whether you’re buying or selling a home, there are several fees associated with the transaction that must be taken into account. This may leave you wondering, does the buyer or seller pay real estate fees? The answer is that some of these fees are paid by sellers, and some are paid by buyers.

Regardless of who pays them, these fees ultimately impact how much money the seller walks away from the closing table with and the actual cost to the buyer. In this blog, we will summarize the fees associated with a residential real estate sale in Rhode Island, who pays them, and when they get paid.


Fees Paid by the Seller


Preparing the Home for Sale

You’ll likely need to spend some money to get your home market-ready to attract qualified buyers unless you’re planning to sell your house in “as-is” condition or to a cash buyer. These costs will fluctuate to a large extent depending on the condition of your home, its design and size, how much demand there is for houses in your neighborhood, and what repairs and improvements will matter most to local buyers.

At the very least, you will likely benefit the most from spending some money on basic pre-listing improvements such as updating dated fixtures, staging, and putting a fresh coat of paint on walls, shutters, exterior doors, and landscaping. Lean on an experienced real estate agent who is well versed in local home sales to give you the best advice on what is necessary to get top dollar for your house.


Real Estate Agent Commissions

One of the principal fees for selling a house will be the real estate agent’s commission. In a standard real estate transaction involving two real estate agents, one for the seller and the buyer, the seller covers the commission fee for both agents.

In 2022, in Rhode Island, the average real estate commission is between 4.19% and 6.05%, with the statewide average being 5.12% of the home’s final selling price. The commission is split between the two agents handling the sale at a rate negotiated between the agents.


Closing Costs

Closing costs refer to fees and taxes due at the time of closing. Some of these costs are covered by the buyer, and some are paid by the seller. Here, we’ll look at expected seller closing costs and address those paid by the buyer in the buyer fees section of this blog.

Here’s an overview of the closing costs expected to be paid in Rhode Island by the seller:

  • Closing attorney’s fee – An attorney will be necessary for discharging the title and mortgage. Your title company may hire the attorney; otherwise, this falls to the seller.
  • Deed transfer tax – Deed transfer taxes vary by municipality. Some areas charge a flat fee, while others charge fees like $10 per $1,000 of the selling price. Rhode Island’s standard transfer tax is $2.50 for every $500 of the selling price.
  • Payoff all mortgages, liens, etc. – If you owe any money on your home, it must be paid off before you can sell. Otherwise, any remaining amount will be deducted from your selling price. Some mortgage companies charge a fee for early payoff, and others charge a recording service fee.
  • Property Taxes – As the seller, you are responsible for paying any outstanding property tax. You may be required to pay a prorated amount calculated up to the day of closing.
  • Utilities – You will need to pay any outstanding utility bills, and you may have to pay a prorated amount up to the date of sale to cover current use.
  • Smoke Detector Certificate – RI General Law 44-30-71.3 requires sellers to have smoke detectors in the home and to present a smoke detector certificate no later than closing.


Moving Costs

This may seem like an odd thing to include in the cost of selling your home, but you do need to move to a new home, so this cost should be considered.

According to HomeAdvisor, local moving costs (a move of fewer than 100 miles) range between $881 and $2,423, for an average cost of $1,650. This price range includes hiring two professionals and renting a truck. Additional services, like specialty items, movers insurance, packaging, and cleanup services, cost more and will increase your total.


Seller Fees Summary

When you add it all up, a seller in Rhode Island can expect to pay approximately 1.0% of your home’s final sale price in closing costs, not including Realtor® commissions. Bear in mind that this is only an estimate. While closing costs will always have to be paid, your real estate agent can often negotiate who pays them — you or the buyer.

This brings us to the fees a home buyer in Rhode Island can expect to pay.


Fees Paid by the Buyer


Down Payment

You must make a down payment to finalize the purchase if you’re using a conventional, FHA, or Fannie Mae mortgage loan to buy your home. The cost of the down payment for mortgages is not static. Depending on your lender and the type of loan you qualify for, down payments can range from as low as 3.5% to as high as 20%. You should shop around for loans until you find the deal that works best for you.

As a side note, many people don’t know that you don’t need down payments on loans backed by the Veterans Administration (VA). So, if you’re a veteran, this is a great place to turn when looking for a mortgage. This is true if you qualify for a mortgage through the USDA (United States Department of Agriculture). You should always speak to a trusted mortgage advisor on which programs you qualify for, but you can also estimate your monthly payment using our handy mortgage calculator.


Closing Costs

Several things are included in the closing costs that are expected to be paid by the buyer. These include:

  • Appraisal Fees – To verify that the home you want to buy is worth the selling price, and hence the mortgage amount you need, lenders almost always require buyers to pay for an appraisal before approving a loan. This fee goes to a certified appraiser who will assess the value of the property you are purchasing.
  • Inspection Fees – Apart from the appraisal fees, you may also need to pay for an inspection of the house. Those fees will go to inspectors who will check the property for any signs of damage. Most lenders require home inspections as a condition of loaning you money. Aside from a structural inspection, buyers should consider inspections for radon, termites, mold, and the foundation.
  • Attorney Fees – You may also need to pay for attorney or broker fees if hiring professionals to help guide you through the home buying process. In some cases, paying attorney fees will also be necessary before they discharge the title and mortgage of the property to you. The closing attorney will also take care of recording the deed with your new town.


Mortgage Insurance and Property Taxes

Mortgage lending is a business that shields itself from potentially significant losses, and lenders often require borrowers to purchase mortgage insurance. Unless your down payment was 20% or more of the listed price, private mortgage insurance is a required purchase if you took out a conventional loan.

When calculating the costs of buying a house, you cannot forget about property taxes. Per SmartAsset, you can expect your effective property tax rate to be around 1.53%. At the close of your loan, a pro-rated amount of property tax will be required to cover the percentage of the current tax year that you will own the home.

Your lender will often include your private mortgage and property tax payments in your monthly mortgage. So, as long as you pay your mortgage on time, you won’t need to be concerned about missing those payments.


Moving Costs

And lastly, don’t forget about moving costs. As mentioned earlier, for sellers, you will also need to pay to have your belongings moved from your old residence into your new home. On average, expect to pay $1,650 for a move under 100 miles.


A Final Word


As you’ve discovered, the answer to whether the buyer or seller pays real estate fees is that they both have fees to be covered. Now you know a lot more about who is responsible for which fees.

Selling or buying a house is a complicated project and may be the largest financial decision you ever make. The more you know going in, the easier time you will have. You want to be sure you thoroughly understand your budget before moving forward.

It’s vitally important to work with a reputable Realtor® who can guide you through the process and refer you to a trustworthy appraiser, inspectors, and attorneys who will help to ease the process and ensure that your best interests are considered in all negotiations.

When you work with Jay Rezendes and the 401 Group to buy or sell, you’re working with an award-winning RE/MAX RI Right Choice Realtor® who is committed to delivering the highest level of service, support, and convenience throughout the journey.

Jay is not only a Realtor® and the founder of the 401 Group at RE/MAX First Choice, but he is also a family man who understands families’ needs. So, when it’s time for you to buy or sell a house in Rhode Island, connect with Jay and see for yourself why his clients call him their Realtor® for Life.