From theday.com:
As Home Prices Fall, So Do The Closing Costs
Lately, buyers have gotten at least some relief from the skyrocketing cost of real estate. Similar relief could be coming from another less obvious, but significant, expense — namely, closing costs.
Since some closing costs are tied to the size of the mortgage, and since average mortgage amounts are flattening — along with the housing market — closing costs could be falling, too, at least in some regions.Nationally, closing costs (also known as settlement costs) have been rising, according to a report earlier this year by Bankrate.com, which surveyed hundreds of lenders nationwide to find an average price for closing a mortgage for a newly purchased home.
According to the report, New York is the most expensive state in which to close a mortgage, with costs totaling $3,887, on average. Connecticut is sixth nationally, at $3,284, while New Jersey is 14th, at $3,158.
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As for New Jersey, neither Lewis of Bankrate nor Gary Lehnes, president of the state’s Association of Mortgage Brokers, could explain its drop in closing costs, from fourth last year to 14th this year.One possible explanation is that more of New Jersey’s home buyers are using title companies to oversee the mortgage settlement, rather than lawyers. Unlike New York, New Jersey does not require a buyer to use a lawyer during a real estate closing.
For New Jersey’s most affluent homeowners, one significant closing cost has risen, however, thanks to the so-called “mansion tax” enacted by the state last year. With that, buyers pay 1 percent of the total purchase price on houses that sell for $1 million or more. “Especially during the boom in 2003, 2004 and part of 2005,” Lehnes said, “we saw houses that had been selling for $800,000 go up over the $1 million level. So for those people, that can be an added expense.”
hi – does anyone know what the normal commission rate is for New Jersey realtors? I have negotiated a 4% commission rate. Is 4% normal?
Jack,
All commissions are negotiable. I’ve heard from agents and brokers that 5 percent is becoming the new norm. However, I still see a significant number of 6 percent listings, so I’m not sure if that is really the case.
While the 4 percent commission, at first glance, seems like a net positive for the seller, realize that some agents will avoid showing discounted commission listings.
I hope our resident Realtors(tm) can add some value to this discussion.
jb
Jack/James
4.5 % and 4% are the norm aroundhere but 2%is the payout on most anyway.They are shown, Foxton’s are also shown, but it is not the payoff that puts agents off of Foxton’s it is dealing with them. They have gotten better as have most listing agents because they need buyers.
KL
I love the “percentage game”! 4%, 5%, 6%…what does it matter if the agent and company can’t market your home? Or worse, if they put you in a position of having to sell it below the market?
Last time I checked, you can’t write a percentage on a deposit slip and take it to the bank. Any conversation about RE commissions that doesn’t include the skills brought to bear for commission paid is just j***ing off.
The concept of “marketing a home” is moot in the Internet age.
Here are the steps to “market” a properly priced home:
1) Take some digital photos.
2) Put the listing info and photos into the MLS.
It’s your call if that’s worth 2-6% of $500K or more.
Here are typical Northern NJ closing costs:
Bank Fees
* $200 Commitment fee.
* $400 Loan application fee.
* $400 Property appraisal fee.
Non-Bank Fees
* $1,300 Attorney fee.
* $400 Property survey.
* $400 Home inspection.
* $3,000 Title insurance.
* $400 Recording fee (paid to county).
* 3 months taxes held in escrow by bank until property is resold/paid off.
That comes to about $10K+ closing costs in most cases.
A drop in home prices wouldn’t even effect these costs, because the only variable is the 3 months taxes, which won’t change until the property is reassessed by the town.
Unrealtor,
To add to that, if this homeowner remains in said house for the average time frame, approx 7 years and subsequently decides to sell, they could be faced with a 6% realtors fee and the NJ realty transfer fee. On a 500k house the selling costs between these two items would equate to approx 35K. Between your buying closing costs and my selling, closing costs it adds up to approx 45K. Without mentioning, the $ this house will suck up in this 7 year time frame, if prices just remain flat, during this time frame, you just lost almost 10%, maybe your entire down payment.
UnRealtor (#5):
Your ignorance is stunning! The Internet hasn’t rendered marketing moot…it’s upped the marketing ante for all agents, while destroying print media as a viable outlet for any serious marketing effort. The RE industry at large just hasn’t gotten the hang of it yet.
If you meant to say that most agents haven’t learned how to market yet, then I’m with you. What you described in your post is what 95% of agents also believe constitutes adequate marketing. It is not. The flat-fee, MLS-access companies do exactly this…and their sellers enjoy the same mediocre results as the sellers rep’d by traditional RE companies. What little marketing most agents do is mainly centered on themselves, not the homes they represent.
However, you’re missing the boat if you believe that real, professional marketing doesn’t make a difference in how well a home can sell. There are precious few available examples, but there are a handful of agents who are figuring out how to leverage the net- and the ability it affords one to tell an entire, complete, compelling story- to sell homes for more. It is also no coincidence that the same agents who are ahead of the game in marketing tend to be the ones who are the best networkers, negotiators and transaction managers. If you also think those skills have no bearing on how well a home can sell, all I can say is that I hope I’m across the table from you someday.
4-5 years from now, you may be surprised at how RE marketing looks…and at the increased sophistication of the message.
Clotpoll.
While your arguments might be true – I think you are trying to justify the increase of commission from 4% to 6% just based on marketing. Also I think that your clientele is mostly unaware sellers, who want to do nothing themselves. For them – I agree 100% that 6% for a good agent is well worth the money.
But for a seller who has been pro-active in doing research on how to increase the resale as well as appeal value of his house, done some homework on how to market his house and is not afraid of haggles, I think 6% commission does not make sense. In the end a house sale is just a transaction, it will happen with or without the 6% realtors involved as middlemen. If a seller is aware and aggressive, he would make the transaction happen for 4% cost and still get top $$, wheras if a seller is passive and laid back, he can make the same top $$ only by using 6% realtor.
I personally do not believe that I “have to have” to pay 6% for a realtor.
Yawn. I get plenty of fancy e-mails and e-brochures from the “Million Dollar Club” overpriced tour guides each week. These gimmicks do zero to raise interest in a property over a simple photo and an address. Only Forrest Gump would be swayed by such things.
So keep the fancy printouts, elaborate online PDF presentations, or other nonsense, and instead focus your efforts on convincing out-of-touch sellers to lower their fantasy asking prices.
Give me the address, tell me the price, and I’ll walk through and decide. The realtor can stay outside in the car.
If realtors were truly confident in the value they add, they wouldn’t feel the need to hide property addresses from buyers:
http://www.realtor.com/FindHome/HomeListings.asp?mlsttl=&frm=byzip&mls=xmls&js=on&target=&ct=&st=&sbls=&stype=&zp=07450&areaid=07450&mnsqft=&fid=so&mnprice=600000&mxprice=1000000&mnbed=0&mnbath=0&typ=1&poe=realtor&x=9&y=7&sid=06345451A927C&lnksrc=sort-price&sbint=1&sblo=0
Also Clot. Although you do not mention it explicitly – there is an implicit assumption that 3-4% realtors are dumb and do nothing whereas 6% realtors (it they have more than 10 years of experience) add a lot of value and are really worth it.
Well – I do not buy this advertisement.
Also – when times were good for sellers (2002 – 2005) in that time – I just totally fail to understand why ANY seller hired an agent. The seller could have put any fantasy price and tried the FSBO route and his house would have sold. Why did people gave 6% of their house value to agent and grossly decreased their profits?? What is the value add that ANY agent 4% or 6% added during 2–2 – 2005??
Unrealtor (post # 10)
Very well said. Couldnt agree more with you.
I’ve wondered myself, that if realtors are so sure of their indespensability, why do they hide the address of the property that they are listing?
ATT and UnRealtor-
I really, sincerely hope that someday, you’ll be killing a Sunday flacking your own homes, and I roll up (I invest in RE from time-to-time, and FSBOs are by far the easiest pickings there are). Nothing beats getting free shots at a homeowner…in the complete absence of a competitive bidding environment!
I cannot really engage you guys on this, because you’re both too in love with presenting wild assumptions as given facts, and you illustrate the Realtor side of the argument by using the worst among us as examples. Frankly, I don’t want to waste my time here defending the indefensible. There are lots of bad agents out there, no argument.
And, here’s a news flash: good agents DO charge more than lesser ones! What business out there runs any differently? People who bring superior skill to bear get paid for it.
Finally, allow me to address one of the statements you made: any halfwitted Realtor WILL give you the address and directions to any listed home at the ring of a phone or as a response to an e-mail. Only the most backwards of troglodyte agents will attempt to withhold basic info in order to force an appointment.
Nothing beats getting free shots at a homeowner…
Frankly speaking clot – it seems like a usual realtor rant, aimed at worrying the unsuspicious and lazy sellers. If I were selling FSBO, you are free to take shots at me, but it is another story whether I succumb to your shots. If markets were the same like in 2002-2005 – I would not. Your statements seem nothing more than the scare tactics that the realtors have been using to justify their existence. Period.
JB – My post is stuck in moderation.
Clot,
You really expose yourself with each new post.
In this thread alone, you’ve engaged in ad hominem, belittling, scare tactics, evasion, and a know-it-all attitude.
Spoken like a true Realtor®. At least you didn’t call anyone a nazi yet in this thread, so you’re making some progress.
Whenever you’re ready, explain why every realtor listing NJ properties on realtor.com must hide the property address from consumers. The fact is, realtors know they’re unnecessary middlemen, and therefore use their information advantage to play games and manipulate consumers, forcing them to call the information gatekeepers.
Realtors possibly add value in helping buyers and sellers navigate through the transaction process, forms, inspections, etc, but this is certainly not worth anywhere near 6% of someone’s home. I’ll give you $20 an hour, if you can provide an audit of all the hours spent.
This is great!