It is very common for people to ask themselves: Who pays the commission to the real estate agent? This is a very important part of the home buying or selling process, and most people are not clear about it. In order to understand who pays for those commissions, be it the seller or the buyer (or both), let’s look at how real estate agents are paid and how commissions are divided.
How do real estate commissions work?
- Real estate agents work for a broker.
- All fees and compensation paid to the real estate agent pass through the corridor.
- A real estate broker is the only person eligible to pay a real estate commission and sign a listing agreement with the potential seller.
How do brokers pay real estate agents?
The divisions will always vary. For example, agents who have been in the market for a short time can receive a commission of 30% -40 of the total commission received by the broker. And, of that amount, other fees may also be deducted (advertising, signage or other office expenses). On the other hand, those who are known as “top productive agents”, could receive 100% and instead pay the broker a desktop rate. The rest of the agents’ salary can be between that ranges.
The fees of listing agents or who put houses for sale
A very common type of listing agreement (between the seller and an agent) allows the broker’s agent to have an exclusive right over the marketing of the property. As the agent brings a buyer to the negotiation, the seller agrees to pay a commission to the broker for a specific amount of money, which is usually represented as a percentage of the sale price. This fee will be shared or divided between the listing broker and the broker that brings the buyer.
Like life, the division of fees between the runners is not always fair or equal (50/50). It will always depend on the type of agreement made with the seller. For example, when there is a buyer’s market, the seller can ask the broker to provide the buyer’s broker with a higher percentage. But in a seller’s market, the buyer’s broker could receive less.
Be sure to ask about local prices, since the commission divisions will always vary, and many are locally based. In some parts of the country, it is very common for a listing agent to earn more than the buyer’s agent, for example.
Who really pays the Real Estate Commission?
It can be said that the buyer always pays the commission, because this sum is usually part of the sale price. If it were the case that the seller does not sign an agreement to pay commission, the sale price becomes instantly lower. This is always something that needs to be negotiated from the beginning and agreed between all parties.
Keep in mind: all real estate commissions are negotiable, but not all agents will negotiate. However, you should never decide on an agent based on the commission you are charging.