What To Know About Real Estate Commissions

Posted on: 2 October 2017

If you are putting your home on the market, you may be somewhat confused about how your real estate agent is paid. Real estate agents usually get paid a percentage of the home's sales price, known as a commission. This amount can be negotiable, depending on what real estate agents earn in your local area, however. To learn more about how your agent gets paid, read on.

How is my agent paid?

Since most agents work for a broker, their commission is split up between the broker, themselves and sometimes with other agents who were involved in the sale of the home. Top agents can often get paid more based on their experience and past sales. There are several variables to consider when evaluating a commission fee, such as whether the agent is full time or part time, is brand new to the business, and more.

It may be helpful to look at an example of a typical sale with a 7% commission on a $150,000 home. Of the 7%, 4% ($4,500) will go to the agent's broker and 3% will go to the agent. After paying a franchise fee, the agent gets $2,070. Since the agent probably has some overhead expenses (gas, business supplies, etc) and must pay taxes on that amount, the $2,070 is further reduced.

Negotiating the commission

You may be able to get the agent to lower their commission in certain circumstances. For example, if you can promise the agent more referrals, it might be in their best interest to lower the fee. If you know friends, family or neighbors who are getting ready to put their home on the market, speak up and offer to refer the agent. You won't know unless you try.

Likewise, if you are looking for another home in the same area, you may be able to interest the agent in lowering their fee for the opportunity to represent you in both the sale of your home and the purchase of another. You should keep in mind, however, that while the agent will undoubtedly appreciate the extra business, it is also still two different transactions and will be just as much work no matter who the parties are.

It's not all about the commission

One of the worst mistakes home sellers make is to place too much emphasis on the amount of the commission. Some agents offer more with their higher commission, and some agents who offer bargain commissions are excellent at their jobs nevertheless. Base your decision on the agent's experience and ease of working with them, and trust them to get the top dollar at any commission.