Buying A House – Who Pays for What?

When buying a house, it can be confusing as to who pays for what. Is the buyer or the seller responsible? Buying a house is expensive & confusing enough. Therefore, it’s nice to know what other expenses will pop up along the way.

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Who pays the Commission?

Many buyers get confused about who pays the Realtor commission on the sale of a house. In other words, they are afraid that it’s their responsibility. Well, that is incorrect. A Realtor’s commission is paid by the seller – it is negotiated with the seller’s agent and considered in the asking price. The commission is usually 5-6% of the purchase price.

The commission is split between the buyer’s agent and the seller’s agent and is dispersed at closing. So, feel confident that your Realtor is working with you to see it through – otherwise they won’t be making a dime.

Who pays for the Inspections?

Inspections are paid for by the buyer. You may hire your own, unbiased person to give you a true and fair interpretation of the condition of the house you intend to buy. Ask your Realtor to refer you to a knowledgeable inspector that they have had a good experience with. An inspection will cost you between $400-$600, plus around $100 for a radon test. In addition to the home inspection, add on cost if you plan on having a septic inspection, tank sweep, etc. In the event of finding an under ground oil tank, the seller usually is responsible for removing it.

The cost of the inspections will be due to the inspectors at the time of inspection. Make sure you bring a check!

Who pays for the Appraisal?

An appraisal is done by your lending bank. They want to make sure that the house you want to buy is worth what you’d like to purchase it for – as they will only let you borrow what they think the house’s market value is. The buyer pays for the appraisal, which is rolled into closing costs along with the cost for your lawyer and mortgage lender.

Who pays for the Smoke/Fire Certificate?

The seller is responsible for the smoke and fire certificate, which is when the smoke & carbon monoxide detectors get checked out and the fire extinguisher is checked for compliance. If they pass, they will get a certificate of continued occupancy. They may not close without it.

Also, keep in mind that if it is a bank owned home, the buyer may be responsible for all inspections and certificates.

Who pays the Closing Costs?

Both the buyers and the sellers will have their own closing costs. As the buyer, you are responsible for yours. (Unless you have a seller’s concession where the seller is giving you money towards closing costs). As always, the amount will vary depending on your situation. A general idea is – for a $300,000 house, closing costs should be around $10,000. Some say around 2-5% of the sale price. However, it depends greatly on your PMI & the terms of your loan. Contact your lender for the loan estimate. Above all they will have all of your information, so they can best inform you. Also, check out Closing Costs – What are They? to get a better idea of what it is you are paying for.

During the home buying process, these are the most common “who pays for what” questions that I run into. Although situations can always vary, this is usually how it is done in our market. Check out this 10 step guide to thoroughly understand the entire buying process.