Tag: MN

Understanding how real estate commissions work is crucial for anyone entering the Minnesota housing market, whether you’re buying or selling a property. In 2024, significant changes were introduced nationwide to how commissions are handled, with a focus on enhancing transparency. These adjustments are meant to empower both buyers and sellers to make informed financial choices.

This guide will clarify real estate commissions in Minnesota, outline recent regulatory changes, and provide practical tips for effectively managing these expenses.

Current state of the Minnesota housing market

Before examining the specifics of commissions, it’s beneficial to review the current housing market in Minnesota:

Understanding real estate commissions in Minnesota

What are real estate commissions?

Real estate commissions are the fees agents receive for assisting in the sale or purchase of a home. These fees are usually calculated as a percentage of the sale price and are settled at the time of closing.

Who pays the commission?

Historically, the seller bore the costs of both their own agent’s commission and that of the buyer’s agent. However, new regulations effective August 17, 2024, require buyers in Minnesota to agree in writing to their agent’s commission prior to viewing properties. 

Although buyers can continue to ask sellers to cover their agent’s commission when making an offer, this change allows for variability in the amount a seller may pay for a buyer’s agent, and is fully negotiable.

Average real estate commission rates in Minnesota

Commission rates in Minnesota are not fixed and can fluctuate based on several factors, including the nature of the transaction, the involved agents, and the negotiation outcomes. Various elements, such as property location, market dynamics, and the services provided by the agent, influence these rates.

Below is a summary of standard commission rates based on median home prices in Minnesota’s major cities:

At Redfin, we strive to offer competitive rates, with listing fees starting as low as 1%* for sellers. Our fees for buyers vary by location, ensuring that your offer remains attractive in the marketplace.

Can you negotiate real estate commissions in Minnesota? 

Absolutely! Real estate commissions are negotiable in Minnesota, as there are no laws regulating these fees. This flexibility allows buyers and sellers to engage in discussions about commission rates with their agents. 

When discussing real estate commissions, it’s crucial to evaluate the agent’s level of service, their marketing strategies, and their familiarity with the local market. Sellers might have the opportunity to secure lower rates if their property is particularly attractive or anticipated to sell rapidly. Furthermore, in a dual agency scenario where one agent represents both the buyer and the seller, there may be additional potential for reducing commission fees since only one agent is handling the transaction.

Tips for a successful negotiation

• Do your research: Look at various agents and compare their services and commission structures before deciding.
• Think about performance incentives: Consider negotiating for bonuses based on quicker sales or higher sale prices.
• Utilize your property’s attractiveness: Sellers of highly sought-after homes might have greater leverage to negotiate lower fees.

Minnesota real estate commission FAQs

What are the changes to real estate commission? Two primary changes have taken effect: buyers are now required to sign an agreement outlining their agent’s commission before they can tour homes, and many markets no longer display buyer agent compensation on MLS listings. Learn more about the real estate commission changes here. 

How do the changes impact buyers in Minnesota? Buyers must now agree in writing to their agent’s commission prior to starting home tours. However, they can still negotiate with sellers to cover these fees as part of their offer.

How do the changes impact sellers in Minnesota? Sellers have gained more negotiating power regarding the commissions they offer to buyer’s agents. They also have the ability to assess and negotiate any commission requests included in a buyer’s offer.

How do you find a real estate agent in Minnesota? If you’re ready to make a move in the Minnesota housing market, whether you’re buying or selling, Redfin’s knowledgeable agents are here to help. 

How can you avoid fees? Selling a home without an agent—often referred to as For Sale by Owner (FSBO)—is one way to bypass commission fees. However, this approach places all responsibilities, including marketing, showings, and paperwork, solely on the seller.

*Listing fee subject to change, minimums apply. Any buyer’s agent fee the seller chooses to cover not included. Listing fee increased by 1% of sale price if buyer is unrepresented. Sell for a 1% listing fee only if you also buy with Redfin within 365 days of closing on your Redfin listing. We will charge a 1.5% listing fee, then send you a check for the 0.5% difference after you buy your next home with us. Learn more here.

Buying a new home is an exciting and big decision, especially if you’re a first-time homebuyer. But before you dive too deep into furniture shopping, picking out new colors for your bathroom, or re-designing your backyard, be sure to budget for closing costs.

Closing costs are the fees and expenses associated with finalizing a real estate transaction and transferring ownership of a property from the seller to the buyer. Let’s break down how much closing costs are in Minnesota, who pays for them, and what costs you can expect to pay as a buyer and as a seller.

How much are closing costs in Minnesota?

In addition to the down payment, homebuyers will also need to pay closing costs before securing the keys to their new home. Typically, closing costs in Minnesota can range anywhere from 2%-5% of the home’s purchase price. But it’s important to remember that this is just a range and the total amount will depend on a number of factors, such as the purchase price of the home, the type of loan, and any adjustments negotiated with the seller.

For example, if you’re buying a home in Rochester, which has a median sale price of $322,500, closing costs could range anywhere from $6,450 to $16,125. Or, let’s say that you’re buying a home in Minneapolis, which has a median sale price of $340,000. Closing costs for a home here could cost you anywhere between $6,800 and $17,000.

Who pays closing costs in Minnesota?

Generally, both buyers and sellers can expect to pay closing costs. But, each party’s closing costs amount will vary depending on what they are required to pay. Another thing to keep in mind is that buyers typically pay for closing costs out of pocket, while the seller’s closing cost payments are often deducted from the home sale proceeds.

Buyer closing costs in Minnesota

Closing costs in Minnesota for homebuyers typically range between 2%-5%. If you’ve paid earnest money, which is typically 1%-3% of the home’s price, this amount will be subtracted from your closing costs. Below are some of the common closing costs paid for by the buyer:

• Appraisal fee: Home appraisals, which typically range from $300 to $500, are usually paid for separately at the time of the service. However, if not, you’ll need to pay for this at closing.
• Inspection fee: Although not required, a home inspection is highly recommended. Home inspections generally range from $300 to $500 in cost and are usually paid at the time of service. However, if not, it will need to be paid at closing.
• Loan origination fee: Some lenders charge a fee for creating your loan. As you shop around for lenders, inquire about what it covers and whether it’s negotiable to avoid high fees.
• Loan processing fee: Lenders may also charge a loan processing fee, covering underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible waivers.
• Loan discount points: If you buy discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rate by 0.25% to 0.5%, but consider your long-term homeownership plans before paying for a reduced rate.
• Private mortgage insurance (PMI): Required for down payments under 20%, PMI might involve an upfront fee at closing, depending on the loan type. It’s usually part of your monthly payment, but some loans offer the option to pay it as a one-time fee.
• Title insurance: Title insurance is a one-time closing cost, with buyers commonly paying for both lender and owner policies.
• Homeowners insurance: In Minnesota, your annual homeowner’s insurance premium may be part of your closing costs.
• Homeowners Association dues: For homes in HOA-managed communities, you might have to pay one month’s dues at closing, which can vary depending on the property and covers maintenance and operational expenses.
• Property taxes: As part of closing costs in Minnesota, you may be required to prepay a portion of your property taxes at closing.

Seller closing costs in Minnesota

The closing costs covered by sellers in Minnesota can vary, but here are a few common closing costs that sellers pay for:

• Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with their agent.
• Homeowners Association fees: If the property is part of an HOA, the seller may need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
• Property taxes: Any outstanding property taxes will be due at this time. However, if the seller has prepaid property taxes for the period that extends beyond the closing date, they may be credited back for the portion they’ve paid but won’t use.
• Title insurance: As part of closing costs for sellers in Minnesota, sellers may pay for owner’s title insurance. Typically, this cost is based on the home’s sale price.
• Transfer taxes: In Minnesota, sellers are responsible for paying state and possibly local transfer taxes. These taxes are typically a percentage of the property’s sale price and can vary widely by jurisdiction.

Median home sale price data from the Redfin Data Center during July 2024.

Welcome to Minnesota, the Land of 10,000 Lakes, where the enchanting blend of natural beauty and urban sophistication creates a diverse and welcoming atmosphere. The state’s vibrant culture is reflected in its cities, with Minneapolis and St. Paul standing as dynamic pillars of the Midwest. Minneapolis, the larger of the Twin Cities, boasts a thriving arts scene, iconic landmarks such as the Mall of America, and a picturesque waterfront along the Mississippi River. So, if you’re considering moving to the state or want to learn more, this Redfin article will guide you through the biggest cities in Minnesota to explore.

1. Minneapolis, Minnesota

Population: 429,954
Median Sale Price: $314159
Minneapolis, MN homes for sale
Minneapolis, MN houses for rent

Surrounded by the natural beauty of the various lakes, Minneapolis offers a vibrant urban lifestyle with a strong emphasis on outdoor activities. The city’s diverse neighborhoods, such as Uptown, provide unique cultural experiences and a thriving arts scene. Minneapolis is also known for its robust job market and a strong sense of community.

Explore more of Minneapolis, MN

2. Saint Paul, Minnesota

Population: 311,527
Median Sale Price: $262750
Saint Paul, MN homes for sale
Saint Paul, MN houses for rent

Saint Paul, the capital city of Minnesota, offers a blend of historic charm and modern amenities. The city’s vibrant downtown area has various cultural attractions, including the Science Museum of Minnesota and the historic Cathedral of Saint Paul. With its community and diverse neighborhoods like Lowertown, Saint Paul provides a welcoming environment.

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3. Rochester, Minnesota

Population: 121,395
Median Sale Price: $273000
Rochester, MN homes for sale
Rochester, MN houses for rent

Beyond its medical prowess, Rochester’s community thrives on events like the Rochesterfest, showcasing local talent and fostering a strong sense of community engagement. The city’s commitment to parks and recreational spaces, exemplified by Quarry Hill Nature Center and Silver Lake, enhances the overall quality of life, making Rochester a welcoming and well-rounded place to call home.

4. Bloomington, Minnesota

Population: 89,987
Median Sale Price: $322900
Bloomington, MN homes for sale
Bloomington, MN houses for rent

Home to the expansive Mall of America, Bloomington offers unparalleled shopping, dining, and entertainment options, drawing both locals and visitors alike. The city’s commitment to green spaces is evident in attractions like Normandale Japanese Garden and Hyland Lake Park Reserve, providing serene escapes within the urban landscape.

5. Duluth, Minnesota

Population: 86,697
Median Sale Price: $211000
Duluth, MN homes for sale
Duluth, MN houses for rent

Nestled along the shores of Lake Superior, Duluth offers a picturesque setting with a strong emphasis on outdoor recreation. The city’s historic charm, including the Duluth Art Institute and the NorShor Theatre, provide a rich cultural experience for residents. With its access to natural beauty, Duluth is an ideal place for outdoor enthusiasts and individuals seeking a relaxed lifestyle.

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6. Brooklyn Park, Minnesota

Population: 86,478
Median Sale Price: $320000
Brooklyn Park, MN homes for sale
Brooklyn Park, MN houses for rent

Situated in the northern suburbs of the Twin Cities metropolitan area, Brooklyn Park offers a diverse and thriving community. Known for its commitment to parks and recreation, the city boasts over 60 parks, including the expansive Elm Creek Park Reserve, providing residents with ample green spaces and recreational opportunities.

7. Plymouth, Minnesota

Population: 81,026
Median Sale Price: $416000
Plymouth, MN homes for sale
Plymouth, MN houses for rent

Boasting a robust park system, residents can explore outdoor spaces like Medicine Lake Regional Trail and French Regional Park, offering lakeside tranquility and recreational activities. Plymouth’s commitment to education is evident in its regarded schools, enhancing its appeal.

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8. Woodbury, Minnesota

Population: 75,102
Median Sale Price: $432000
Woodbury, MN homes for sale
Woodbury, MN houses for rent

The city’s numerous parks and recreational areas provide ample opportunities for outdoor activities. You will find the Central Park Amphitheater and the Tamarack Village Shopping Center, which offer a range of entertainment options. With its school system and access to outdoor amenities, Woodbury is an ideal place for those seeking a balanced lifestyle.

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9. Lakeville, Minnesota

Population: 69,490
Median Sale Price: $457900
Lakeville, MN homes for sale
Lakeville, MN houses for rent

Lakeville, known for its scenic lakes and natural beauty, offers a high quality of life with a strong emphasis on outdoor recreation. The city’s diverse neighborhoods, such as Spirit of Brandtjen Farm and Argonne, provide various housing options. With its strong job market and access to outdoor amenities, Lakeville is an attractive destination.

10. Eagan, Minnesota

Population: 68,855
Median Sale Price: $386000
Eagan, MN homes for sale
Eagan, MN houses for rent

In the southern suburbs of the Twin Cities, Eagan is a perfect blend of suburban tranquility and urban convenience. Known for its well-planned residential neighborhoods, the city provides a peaceful living environment. Lebanon Hills Regional Park highlights Eagan’s commitment to green spaces, offering miles of trails, lakes, and recreational opportunities.

Methodology: The population data was retrieved from the United States Census Bureau for 2021, while the median sale price data was sourced from the Redfin Data Center in January 2024.