Are Realtor Fees Included in Closing Costs? What to Know

Realtor fees aren't included in closing costs. They’re technically separate costs, although frequently lumped together in conversation, likely because they’re both paid at closing.

Realtor fees are most often paid by the seller, and cover the commissions for each real estate agent. Closing costs include various fees and taxes paid by both the buyer and seller, though buyers typically bear more of the cost.

It's important to remember that you can negotiate realtor fees, and they're not set in stone—there’s plenty you can do to reduce them, including using a low commission realtor to save money if you’re selling your home.

While closing costs aren’t as flexible, you can sometimes negotiate for the seller to cover them as part of the deal. We explore all this and more below.

Are realtor fees included in closing costs?

Realtor fees aren't included in closing costs. Although they’re paid at the same time, they’re technically separate. Realtor fees cover the actual costs of the realtor while closing costs lump together several smaller fees, taxes, and miscellaneous costs related to the home's sale.

Some of the confusion around whether realtor fees are part of closing costs comes from the fact that they’re paid simultaneously (the closing). It also doesn’t help that many websites and other sources lump them together in educational content.

Ultimately they're paid to separate parties, but you’ll get the information regarding how to pay your closing costs before the actual closing, so there shouldn’t be any surprises there.

What are realtor fees?

Realtor fees are the commissions for the real estate agents involved in the sale. Most realtors work 100% on commission, which is how they get paid. Realtor fees are typically a percentage of the home’s sale price.

The national average realtor fee ranges from 5-6%. The seller's and buyer's agent then pay a portion of their commission to their respective brokerages, ranging from as little as 10% to as much as 50% or more.

We’ll illustrate this with a simple example:

• Let’s say you’ve sold a home for $500,000. If the realtor fee is 5% (a bit lower than the average, but a more round number), the total realtor fee is $25,000.
• The money is split evenly between the seller’s agent and buyer’s agent, giving each $12,500. If the agents both pay 30% of their fees to their brokerages, that leaves them with $8,750 each.

Realtor fees can significantly impact the net proceeds from your home sale, so it's important to understand how they're calculated and distributed.

NAR settlement commission update

Traditionally, the seller pays the whole fee for both realtors, though this practice has changed with the recent settlement by the National Association of Realtors (NAR).^[1]

Now, buyers must negotiate commissions directly with their agents and must sign a written agreement before touring homes. These agreements must include:

• A clear disclosure of the compensation amount or rate and how it will be determined.
• Specific and objective compensation terms, with no open-ended agreements.
• A clause that prohibits the agent from receiving compensation beyond the agreed amount or rate.
• A statement emphasizing that broker fees and commissions are fully negotiable and not fixed by law.

While buyers can still negotiate for sellers to cover these commissions through concessions during contract negotiations, it’s no longer a standard expectation.

What are real estate closing costs?

“Closing costs” is a blanket term for a number of fees, taxes, and other items that are paid all together at closing.

Both the seller and buyer have their own closing costs, which are usually paid separately. However, sellers sometimes offer concessions, covering some or all of the buyer’s closing costs to make the deal more attractive.

Closing costs can include things like:

• Lender fees
• Appraisal fees
• The initial homeowner's insurance premium
• Title insurance fees
• Home inspection costs
• Attorney fees (for any real estate attorneys enlisted in the process)
• Escrow fees (an account that holds funds to be used for homeowners insurance and property taxes)
• Prepaid interest on your loan (paying what will accrue between closing and your first payment)
• Outstanding HOA fees or property taxes owed by the seller (these must be settled before ownership transfers)
• Transfer taxes (for the title ownership transfer)

Typical closing costs for the buyer can be 2–5% of the total loan amount, which could cost you between $8,000 to $20,000 on a $400,000 home loan.

Closing costs are typically less for the seller, but it can depend on negotiations—many buyers ask that the seller cover some (or all) of the closing costs. With the recent NAR settlement, sellers may need to cover the buyer’s agent fees by signing a compensation agreement or offering concessions in the contract. So, be sure to factor this into your total closing costs.

How to budget for realtor fees and closing costs

Budgeting for these costs can be a challenge, but there are some things you can do to prepare.

• Realtor fees average 5-6%, so you can look at the price of the home you’re considering and get a ballpark estimate of your costs. You can also use our real estate commission calculator to better understand.
• Closing costs are similar: you can ballpark the 2–5% and set aside that money as you save. A few days before the closing, you’ll get a “closing statement” detailing all the costs you’ll be responsible for.

The best thing to do is talk to your lender and realtor and ask them to be transparent about incurred fees. Buyers may also be able to roll their closing costs into their mortgage, though not all lenders allow this.

Regarding how much money to expect to pay, we can look at the example above of a $500,000 home. If realtor fees are 5%, that’s $25,000 for which the seller is likely responsible. This will come out of the proceeds of the home sale.

Assuming 3% closing costs on a $500,000 mortgage, the buyer would need to pay $15,000 unless they can negotiate concessions from the seller to help cover that amount. This cost must be paid at closing if it is not rolled into the mortgage.

The bottom line

Realtor fees and closing costs are separate things, but they’re both facts of the real estate world and are due at closing. Realtor fees are self-explanatory, but closing costs can be confusing. They sum up the various non-realtor fees incurred.

You can ballpark realtor fees and closing costs using the average percentages (5-6% for realtor fees, and 2–5% for closing costs), or use an online calculator. If the numbers seem too high, don’t be afraid to negotiate.

The best way to manage these costs, though, is through transparent communication. Discuss fees and concerns with your lender and realtor, and don’t be afraid to ask for clarification. These professionals are there to help with questions like this.