How do i pay my real estate agent? is his fee included in the closing cost?
How you settle closing costs is going to depend on how the loan has been structured.
In terms of a refinance transaction most lenders build the cost of closing into the loan. So if you were borrowing 400,000 and closing costs were 10,000 you would have 390,000 in credit which would be used to pay off the old loan. Most lenders structure new loans to cover all closing costs and the full payoff, however there are times in which borrowers involved in a refinance will come to the table with money - this occurs when the new loan amount does not cover closing costs and the payoff. In our previous example if the payoff of the old loan was 392,000 it would mean the borrower would need to bring 2,000 to the table to settle the loan.
In terms of a purchasethe closing costs are usually paid by the borrow and not built into the loan. One can consider this an additional expense on top of the down payment meaning if your down payment is 50,000 and closing costs are 7,000 you will have to come to the table with 57,000 to close the purchase. Paying closing costs in a purchase as opposed to a no cost loan is oftentimes the smartest solution because it will mean a lower interest rate and less paid over the course of the loan. You can build closing costs into a purchase loan, but this must be done when negotiating the purchase price through a seller credit. If you take advantage of a seller credit make sure your loan officer uses the entire credit, otherwise any additional funds that were not used will be returned to the seller. You should also be aware that certain closing costs cannot be satisfied with a seller credit, which means you will have to come in with some money (usually reoccurring closing costs - hazard insurance premium, prepaid interest, etc...).
If you are talking about your real estate agent - meaning a buyer's agent - someone who helped you find a home, typically their fee for service is earned through negotiations made by the seller and listing agent. If the seller has agreed to a 6% commission with the listing agent, the listing agent will surrender 3% to your agent for doing half the work (listing a home successfully worth 3%, bringing a buyer to a listing successfully 3% - had the listing agent done all the work this would be known as dual agency and they would earn the entire 6%, dual agency must be disclosed). So in this instance your agent will earn their commission based on the final purchase price and successful closing. The commission is taken off the top of the sale price and divided amongst agents at the time of settlement. There are times however when the agent will expect the buyer to pay their commission despite seller agent negotiations. These instances however are rare, and require up front contracts to be in place. You should only have to worry about this is if you signed a contract to this degree.
Regardless of whether this is a purchase or refinance transaction, the closing will be handled by an escrow officer or an attorney. This is a third party arbitrator meant to ensure everyone involved in the transaction gets what they are expecting. If you have unanswered questions as to final closing figures, you could call your escrow officer and request an estimated settlement statement which should break down exactly where you stand in terms of cash needed to close, or funds that you will be receiving back after closing. In addition this document will serve as an excellent resource as to final cost and where that money is going when dispursed.
If you are the purchaser and the home that you are buying is listed by an agent the fee for your agent will be shared by the contract signed by the listing agent. The agent will be paid at the closing from the sellers proceeds.
If you are the purchaser and the home is not listed by an agent then your agent will need to negotiate thier commission with the home seller. Many sellers understand the benefits of the agents but there are still some that don't and will fight the commission.
If you are the seller you should already be in a contract with your agent and you will pay the agent from the proceeds of the sale based on that agreement.
In some rare situations as the purchaser you may have to pay the agent out of your pocket. If the agent is not able to negotiate the payment from the seller at the closing. A normal agent commission would be 3% but that can be negotiated down.
Do not be afraid to ask your agent about there compensation. A good agent has nothing to hide.