Real estate commission: How much is it, and who pays what?
How much do real estate agents make on a sale?
A real estate commission depends on the type of services provided, the actual agreements between the parties involved, and on local custom. The most common figure is 6 percent.
1- Typically, the seller pays the commission
2-The commission is usually split between the buyerâs and sellerâs agents
3-Sellers can pay lower fees by using discount brokerage services or selling on their own
How much do real estate agents make? That depends
A real estate agent usually doesnât earn an hourly wage. Instead, most make their income only after a home has been sold. This income is in the form of a commission, which equates to a percentage of the homeâs selling price. So the answer to how much do real estate agents make will depend on how much the home sells for.
The average commission today is between 5 and 6 percent of the homeâs sales price. Say the home you buy sells for $300,000. A 6 percent commission would equal $18,000.
Who gets that money and who pays?
But that commission money doesnât go only to your agent. Itâs typically split 50/50 between the buyerâs agent and the sellerâs agent (also called the âlistingâ agent).
âIf the sellerâs agent also finds the buyer, the agent keeps the entire commission,â real estate broker Matt Buttner says.
The good news for buyers is that they donât pay this commission fee. The seller pays the commission at closing. It then gets split up between the buyerâs agent and sellerâs agent.
How a commission rate is set?
Realtor Kevin Deselms says the commission percentage isbased on several factors. This can include local market conditions.
âBut the amount is often based on negotiation between the seller and the listing agent or the agentâs brokerage,â he says.
In other words, the commission is negotiable. And some agents are willing to give discounts. In fact, three out of five sellers get a discount on their agentâs commission.
âCommission rates have been trending down in recent years,â says Buttner. âThis is mostly because of the internet and technology. The MLS now automatically syndicates the listing out to real estate websites like Zillow and Realtor.com. So a listing agentâs job is easier.â
Discounts are given for many reasons.
âSay, for example, a client is selling one house and buying another using the same agent. In this case, the agent is more likely to offer a discount,â says real estate attorney/Realtor Bruce Ailion. âOr say the property is in a hot market and competitively priced. It might take less work to sell. That could lead to a discount.â
When the commission is too high
If a seller thinks the commission rate is too high, he or she can ask for a lower rate.
âA 6 percent commission can often be negotiated down to 5 or even 4.5 percent. This will depend on the selling price of the property,â says Buttner.
Sellers who canât get the commission lowered have options.
âIf the agent wonât budge or the customer doesnât like it, theyâre free to look elsewhere,â says Ailion.
If high fees are a concern, sellers can shop around with different agents and brokerages.
âThere are also flat-fee brokerages and MLS companies. Or an ala carte brokerage may be a good option,â says Ailion.
Why an agent is worth that commission?
Agents believe they are worth the commission they charge.
âBuyerâs agents work much harder for their money,â says Buttner. âThey often work with a particular buyer for months. They show them multiple houses and make many offers before something sticks.â
For this reason, the buyerâs agent sometimes makes a bit more than the sellerâs agent.
âA lot of brokerages that charge less than 6 percent will still offer the buyerâs agent a full 3 percent,â Buttner says.
Remember that an agentâs hard work is not rewarded with every client.
âNot all transactions result in them getting a commission,â adds Ailion. âSo the costs associated with transactions that donât close must be factored into those that do.â
Ailion understands that 6 percent may seem high. But consider all the unpaid work that goes into being an agent.
âImagine if you ran a McDonaldâs. But you only collected after your customers ate the meal and were 100 percent satisfied. The cost of burgers and fries would have to be much higher,â says Ailion.
âLike a good doctor or lawyer, I believe a good agent is worth their fee,â Ailion says. âYouâre dealing with likely the most significant asset in your life. So choosing the best representation makes sense.â
Consider, too, that agents say they are held to higher standards than many other pros who earn commissions. This is especially true of Realtors.
âMany agents spend so much time as sole proprietors of their own businesses. We also have continuing education requirements that must be met to renew our licenses,â says Realtor Kevin Deselms.
When you hire a lawyer or surgeon, âyouâre not concerned with the hours spent on the task. You want the best odds of experiencing the most favorable outcome. Thatâs how people should choose their real estateagent,â Deselms says. âWho do they believe will give them the best result? In most cases, this wonât be a discount broker.â
Click Here To Learn More About How Much Does A Realtor Make?
Source: themortgagereports
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