The Best Way to Divide Closing Costs and Commissions


Closing Costs

The first question is from Julie. "We are starting to implement the loyalty agreement, and that’s fantastic. Do you give the lender any instructions as far as how the closing costs are divided between the closing costs and additional commissions?"

As far as the lender, one thing I love about working with your vendor partners is they are going to know about the transaction fee. Even though they know about it, it seems we have to remind them from time to time about that. They are divided up between the closing costs that we’re able to obtain for our buyer and then they also have the line item in our case of the $695 transaction fee. Is there any different take you would have on that Stacie, as far as dividing up closing costs with lenders?

Yeah, so actually the lender, in our state, generally our buyers use up almost all of our closing costs because sometimes they aren’t paying for their home inspection outside of closing. So if they ask for 2% or 3% of closing costs from the seller, generally they are getting used up.

So then the lender will list under the commission, it will say ‘additional commission to the brokerage’  is how most of ours is worded. And then it just gets charged to the buyer on the buyer side. But we don’t tell the lender how to specifically do that, they know how much and what they can put under closing costs, and then we will list it separately. 

We get that to them at the time of the purchase agreement, otherwise, it can get missed. We let them know up-front when we send the offer.

Additional Commissions & Transaction Fee

The second part of Julie’s question is around the royalty agreement and the buyer regarding the additional commissions or transaction fee. Number one thing before verbiage is confidence. You literally have to role-play and practice that out with agents. Agents will get nervous, I’ve seen them sweat and their voice change as they get into talking about the verbiage around a transaction fee, so you really have to coach to that.

Number two is setting the buyer at ease in the sense that your buyer agent is going to do all they can to procure closing cost for the buyer. It doesn’t always happen, of course, but if closing costs are procured, that transaction fee rolls right into that closing cost, making it not a big deal. If the buyer’s agent makes it a big deal, then it’s going to be a big deal to that buyer. That’s where the confidence and clear communication that it rolls into the closing costs is really, really critical. 

The last piece, and this is more of a mindset thing, is sharing just the services that your team, your admin, your closing coordinator, whoever’s handling that file, we all know the work that goes into handling a file from contract to closing. On that level of detail, it’s mission critical.

When you communicate the value of those services, $695 or whatever that cost is, is minimal. From a verbiage standpoint, if you’ve got confidence, clearly articulate about the closing costs, and you’re communicating the value you’re bringing to that buyer from contract to closing, it’s  small price to pay for the services that are being rendered.

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