How Commissions Figure Into Your Real Estate Deal

Real Estate Blog

Selling a home involves a good many facets, and the process can be either simple or complex. Real estate agents are experts at understanding the entire process from start to finish. They are paid in the manner many are paid in the sales industry: by commission. Read on to learn more so that you can go into the hiring process armed with information.

What is a commission?

It might be easiest to view a commission as being the same thing as a percentage. The agent earns their pay by completing the sale of your home and then they take home a percentage of the final sales price. The higher the price of the home, the greater the amount of the agent's commission. Getting paid in this manner is not for everyone. They must begin working for you from the moment you sign the agreement, and it can often take months before they are able to be paid for the work they will do for you.

How much is the commission?

Many people who sell real estate are not aware that they have a say in the amount of the commission. You can negotiate for a lower commission fee under some circumstances, but before you do so, it might be helpful to understand how the commission is determined. It's not very likely that the agent will actually receive the amount of the commission that you agree upon. There are several other parties that take a piece of the agent's cut that reduce the final amount considerably.

Where does the commission go?

Your agent likely works for a broker under the auspices of a real estate firm along with other agents. The broker is provided a percentage of the commission fee since they are providing the agent with an office, secretarial services and more. Most agents must also contribute part of the commission to the franchise. When you deal with a well-known nationwide real estate agency, the agent must pay to use that name. When you factor in other miscellaneous expenses like fuel, business supplies, taxes and more, the amount is a lot less than it might at first appear.

How is the commission determined?

Don't make the mistake of viewing an agent in the light of their commission. Some agents have low commission fees and still do an excellent job of selling your home. Some agents that garner high fees may do no more for you than that of a lower commission agent. It's better to base your hiring decision on other factors than just the commission price point. Instead, take a look the agent's experience, past sales, personality, area industry contacts, and your gut feeling.

Talk to a real estate agent today to get a better idea of what to expect in terms of a commission.


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