HOW DOES COMMISSION WORK ?

Written By Jennifer Wilson

One of the largest expenses that come with selling a home is the commission. When a seller signs a listing agreement, they agree to a commission rate with the listing agent. Regardless of what you may hear, there is no average set rate. The rate is completely negotiable between the Listing Agent and the seller. This commission rate is often split between the seller’s agent and the buyer’s agent. The rate can be a flat rate or a percentage of the sales price.

Let’s look at an example. Let’s assume your home sells for $500,000. The agreed upon total commission rate to be split 50/50 between the selling agent and listing agent is 6%, or 3% each side. The total 6% commission would equal $30,000 or $15,000 due to each agent.

Generally, the agents also owe money to the brokerage that they work for so they don’t always walk away with the complete $15,000.

So who pays the real estate commission? Real estate commission comes from the sale of the home and is generally split between the listing and selling agent. There is often a misconception that the hiring of a buyer agent is free. The selling agents commission is added to the selling home price, which would’ve been lower without the additional commission added to it. In the end, both the seller and the buyer pay the real estate commission as part of the home selling price.

In some markets, some buyers may offer to cover these costs. When housing inventory is low, but demand for homes is high, buyers have to get creative. Some buyers might offer to cover closing costs in order to make their bids stand out without making an offer above the listing price. The seller gets to take home higher profits while the buyers can enjoy a reasonable price for the property. Keep in mind that this is rare and you should consult with your Agent before proposing it as a buyer or seller.

Before your decide on a commission that works for you, explore the services the Agents are offering you and determine if it is fair for your scenario. There are Discount Agents, Flat-Fee Agents and conventional Agents. Each will offer you a different quality of marketing and customer services.

If you’d like to learn more about commission or the Charleston area, please reach out to me.

 

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