Have you ever wondered just what happens to that big real estate commission the seller pays to sell a house? Ever wonder how the Buyer’s agent gets paid? I think lots of folks have. So I thought I’d write an article explaining where all of that money goes.
The first thing you need to know is that the broker, not the agent, gets the commission. Each company has just one broker. I'm an associate broker at Prudential Jack White-Vista Real Estate but the company has just one broker for three office locations with over 100 sales associates and associate brokers. You as a seller will normally be dealing with a sales associate or an associate broker. That person must operate under the supervision and direction of the broker of the company they work with.
Most brokers in our market charge a percentage of the sales price as a fee for their services. This fee can range from as little as 1% to over 10%. In our market a typical broker’s fee for an existing house is 6%. That’s $12,000 for a $200,000 house. Let’s run with that example and follow the money in a typical Valley transaction.
In most cases the listing broker will offer part of their commission as an incentive to the selling broker. Most will split the commission 50/50. In the Valley RE/MAX, Keller Williams and some independents are starting to keep more than 50% of the broker’s commission. Lately we’re seeing 2.5% of a 6% broker’s commission offered to the selling broker by these companies.
On a 50/50 split a typical transaction looks like this:
Listing agent... the broker has an agreement with your agent that determines how much the agent is paid. 60% of the broker’s fee is a common amount to pay. Another arrangement is to have a fixed monthly fee called a "desk fee."
The agent is a independent contractor in most cases and must then pay their expenses out of this amount. Agent expenses usually include advertising, automobile costs, gasoline, MLS & Realtor® dues, office supplies, signs, computers, insurance, etc.
So the listing agent gets around $3,600 and might pay $600 in expenses. That leaves $3,000 before taxes that your listing agent makes on your $200,000 house.
Selling agent... the selling agent will have a commission split or a desk-fee arrangement with the selling broker and expenses similar to the listing agent. So we can assume the selling agent also ends up with $3,000 before taxes. Their broker gets the rest.
Although there are exceptions and broker-agent agreements vary, almost all of the real estate agents in our market are paid this way. Some agents have "teams" with licensed people working for them called "buyer’s agents." They work sort of like a proxy for that agent and typically receive 50% of the selling agent’s commission. In this case the buyer's agent is working for the selling agent. By the way if the agent they work for also has the listing, then that buyer’s agent can’t represent you as a buyer.
So how does all this affect you?
As a seller you might want to make sure your agent is earning their commission. Ask them about their marketing plan for your house. Most people will learn about your home from the Internet or from another agent. Ask how they are presenting your property on the Internet. And..is it easy for other agents to show & get information? Are competing homes offering higher commissions?
As a buyer you can use your own agent to represent you at no cost. If you use the seller’s agent they earn twice the commission, you save nothing, and there’s no one in your corner negotiating and advocating for you.
See more at http://alaskahomepro.com