How Much Should a Real Estate Agent Get Paid in Commission?
If you are a consumer planning to buy or sell a home, you might be knowing that real estate agents get a commission for their tasks. And these are the things that create unclear scenarios in the minds of the audience.
The most popular question that revolves in the mind of the audience is how much should a real estate agent get paid in commission.
The whole transaction involves a number of parties. If you want to know how much a realtor makes, we have got you covered. Let’s get started to find out all the answers you are looking for.
Explaining Real Estate Commission
It is defined as the percentage of the total sale price of a home for working on a sale. The commission is formed from the part of a seller’s closing costs. You can also term it as realtor fees. A specific percentage or amount is decided between the realtor and homeowner before the settlement of the payments.
The commission rates are negotiable and could vary in the countries. But the average commission in the USA generally is paid between 5-6% of the purchase price. For instance – If you have decided to sell the home at 200,000 US Dollars and the commission rate is 5%, the seller will pay you 10,000 US Dollars as a commission price.
Division Of Commissions
Real estate transaction includes a selling and a listing agent. Every agent works for a different brokerage. And the agents of sellers and buyers are paid in addition to the broker of every firm. So, we can say that the commission amount of real estate is actually divided into four parts. But most people believe that agents are putting all the money in their pockets, which is not the case because of these divisions.
Splitting The Commissions With Real Estate Agents
Every real estate agent has procedures and rules for splitting the commission amounts with the agents. It varies for every company. Generally, it depends on a tiered system. If you are a new agent, you can split the brokerage to 50/50. With the increase in the agent’s production, the split with the house occurs.
Negotiating The Commission With The Real Estate Agent
The buyer can absolutely negotiate the amount of the commission. The best time to negotiate with the perspective of the buyer is before hiring the realtor and not after it. It is one of the most important questions that the buyer should ask before proceeding with the final agreement.
Some real estate agents happily accept the negotiation, while others do not. If you are buying and selling the property with the help of the same agent, do ask for a commission break.
A smart agent might make some concessions in this break. If you are an agent and you don’t have any rules regarding this, you might be missing out on profits. It is one of the intelligent business decisions to make. A smaller commission amount from two sales is comparatively better than nothing.
Time of Payment of Real Estate Agent
Once the realtors close a sale, they get their due share. There could be exceptions, but this is the standard. After the final transaction, the agents of sellers and buyers receive their commission at the time of closing. Let us tell you that real estate agents are paid indirectly. Only brokers are the ones who receive real estate commissions. The agents then deliver the cheques to the owner, who will further deposit the cheque and give the due share to the agent.
Now the question arises do the real estate agents always get the commission? The answer is yes in almost every case. However, flat fee real estate brokerages also exist. There are flat fee companies that charge a little amount to get your home listed in the multiple listing service, shortly called MLS. But a flat fee agent does something else for you. When a seller opts for this option, the buyer’s agent should get the going rate for the property, which means the present rate of the area.
How much do the realtors actually make on a sale?
After reading the above information, you can very well assume that the amount the realtors get is their gross commission, which is not the sum they actually make. They also need to cover the overhead expenses, similar to other businesses like advertising, marketing material, internet, to name a few. So, they only make a fraction of the amount of the cheque.
The changes in the real estate market also affect the amount of commission the realtor makes.
Read More: Guide to Discount Real Estate Brokers in America
To sum it up
Believe it or not, real estate is a lucrative field to make loads of money. The average amount that the realtor makes depends on place to place. But there is no denying the fact that it requires hard work and smart techniques to get success in this field. If you think that getting a license and doing all this is easy, you might need to think again. At last, don’t forget to read the terms and conditions of the contracts carefully and ask as many as questions as you want about the commission if you are unsure.
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
