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Understanding Commissions

The vast majority of real estate agents make a living largely, if not totally, on commissions. How much are these commissions and who pays them? Who shares in those commissions and what is the best way to get larger commission checks? What do sellers get for their commissions and why is this form of payment beneficial to agents?

How Much are Real Estate Commissions?

Generally, the standard commission fee for a property is 6%.

Who Pays Real Estate Commissions?

Real estate commissions are paid by the seller.

Who Shares in These Commissions?

Unless there are significant differences in whether it is a buyers or sellers market, commission are usually always split 50/50 between the agent who listed a property and the agent who sold the property. The commission is not based on the listing price, but the final sales price. For example, if a property is sold for $300,000, the TOTAL commission paid by the seller would be $18,000. The agent listing the home for sale would get 50% of that or $9,000, with the agent who sold the property getting the remaining $9,000. Keep in mind, agents will likely be obligated to share a portion of that commission with the Broker whose license they work under.

What Sellers get for Their Commission

Why are sellers willing to pay 6% of a home's selling price in commissions? The biggest reason may be that, in many cases, much of that 6% is recouped in getting market-value for their property. This is done by helping establish the correct pricing through a market analysis. In addition, the broker and agent will take on the work and expenses involved in marketing and advertising, including conducting open houses. Sellers also will get access to the local Multiple Listing Service (MLS) and the network of local real estate agents. Sellers also have a professional they can rely on to guide them through the bidding, sale, and closing process.

How Can Agents Get Bigger Commission Checks?

It is relatively simple to get bigger checks. Get more listings, sell more properties, and sell higher end properties. Agents can also benefit by focusing on selling the houses they have listed. This gives them the full 6% commissions (minus broker and advertising expenses).

While the word "commission" often worries some prospective agents, it actually allows them to get paid what you are worth. While getting started and established can be a challenge, it can lead to a very lucrative career, especially for those with a passion to help people buy or sell real estate. Realty Scout is here to help!