Real Estate: A Few Rules of Thumb

Who Pays Which Fees:

Remember that all fees are negotiable and depend on the current market climate. For example: if there is a shortage of inventory and home prices are increasing, then the leverage shifts to favor the seller (seller’s market). On the other hand, if there is a high REO saturation (bank owned properties) and a large number of homes on the market, then the buyer will have more negotiating power (buyer’s market). The buyer usually gets to choose which title company will complete the escrow process, but currently the market is experiencing an inventory shortage (this is the case across the country). This means that sellers are typically writing counter offers, and changing the title company along with a few other terms in the contract (such as price, close date, etc.).

The Seller:

  • The agent fees. Typically a real estate agent will list a home for 5%-6% of the home’s selling value. The agents usually split the fees, 3% to the listing agent and 3% to the buyer’s agent. Often times the listing agent (with the seller’s approval) decides on how the agents split the commission, and can take 3.5%  while offering 2.5% to the buyer’s agent.
  • If the home is located in an HOA (home owners association), the seller must purchase the resale package(s).

The Buyer:

Both the Buyer and the Seller:

  • Typically the cost of escrow is split 50/50.



How to Calculate the Value of a Home:

I have been working for a real estate appraisal management company for the past two years. On average I process 60-100 Broker Price Opinions per day, for homes across the United States. I have personally found that Zillow’s online estimate (Zestimates) is a good indicator of a property’s value. From my experience, the Zestimate tends to value homes on the higher side, so I use it as the “maximum value” that a property is worth. The tax assessed value tends to be a good indicator of the lower limit of what a homes is worth. Depending on the area, the tax assessed value can be dramatically different than the actual market value of a home (California is one example of a state that assesses the taxed value much lower than the actual market value of the home). The value tends to reside somewhere between the price of the average sale in the area (homes with similar characteristics within 1 mile), the Zestimate, and tax assessed value.

Are you looking to purchase or sell a house? If so, where and are there any questions you have about the process? Comment below!


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