Real estate agents are paid on a commission
basis at the successful conclusion of a real estate transaction. Commissions
are a negotiated percentage of the sales price of a home paid to the
agents of the buyer and seller. Some brokers offer discounted commissions,
some as low as 2%. Some charge as high as 10%. The norm is 6%. But know
this: you get what you pay for.
How real estate commissions are divided
Using an example of 6% total commission:
3% Listing Commission is to be divided between the listing agent and
his/her broker usually at a 50:50 basis. This means the broker gets
1 1/2% and the listing agent gets 1 1/2%.
+3% Selling Commission is to be divided between the selling agent and
his/her broker again at a 50:50 basis. Here again, the broker gets 1
1/2% and the selling agent gets 1 1/2%.
3% Listing Commission + 3% Selling Commission = 6% Total Commission
The fact of life is that below a 5% commission,
very little promotion is done. Most full-service brokers will charge
a 6% commission, the generally accepted industry norm.
Broker expenses and services
Brokers incur general expenses running
their offices and providing a comfortable place for clients and agents
to meet and to conduct business. There is the usual office overhead
to maintain the premises: telephone, computer expenses, utilities, insurance,
taxes etc.
Multiple Listing Service (MLS is system
that provides the members belonging to it detailed information about
properties offered for sale) charges money to advertise. It cost the
broker to belong to this service as well as using it. MLS provides full
exposure for your house immediately making it available to thousands
of real agents, brokers and those motivated serious buyers under the
wings of these Realtors.
It's essential to advertise to gain immediate
and greatest exposure. Newspaper advertising, fliers, co-op advertising,
advertising by fax, Internet, magazine, networking expenses all cost
money. The best home will not sell if no one knows about it
Open houses, lock-boxes, "For Sale"
signs and incentives for agent networking is hindered by offering a
lower commission. Given a choice of selling a 5% commission house and
a 6% commission house, which one do you think the broker or agent will
be more likely to push?
Sales agent expenses
Agents do not incur the high overhead
expenses that a broker does. However, beyond daily living expenses,
the agent must take accredited real estate courses yearly to maintain
his licensed right to sell. There are license fees and 4-door new auto
maintenance costs. A higher commission naturally motivates the agent.
Who pays the commission?
Sellers Agent: Usually the seller
pays the sales commission because the broker is most often an agent
of the seller. Through a listing agreement, the seller agrees to paying
a specified commission. The broker becomes the owner's representative.
The broker may employ a salesperson who is obligated to get the highest
price possible for their client, the seller. A sellers agent:
The agent that lists the house will
"help" buyers some of the time. The sellers agent is duty
bound to get the highest possible price and best terms for the seller.
"A buyer who relies on the seller's agent
or on dual agency does not receive the same degree of legal protections
as that afforded by an agent acting solely on behalf of the buyer."
- Oklahoma Supreme Court, SNIDER v. OKLAHOMA REAL ESTATE COMMISSION,
June 1, 1999.
Buyers Agent or Exclusive Buyers Agent:
A real estate buyers agent represents the consumer who is looking to
purchasing a property. The buyers agent works exclusively for the client
and has the clients best interest in mind throughout the process. A
buyers agent is obligated to get the lowest price possible for their
client, the buyer. The buyers agent should:
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