Real Estate Agent Commissions

Real Estate Agent Commissions

Our commission? Who pays us? How much money do we make? When we give advice to and represent the buyer in a real estate transaction, we will typically earn a commission for our knowledge and ability to close the deal. We help you find lenders, your dream home, facilitate the entire transaction, and strive to obtain the keys to your front door. When you buy real estate, in most cases you will not owe us any money at all. Our commission usually is paid by the seller when the settlement funds are disbursed.

When Does the Home Buyer Owe a Commission?

In the beginning stages of our relationship with you, we will stress the fact that not all listings and homes will be listed through a real estate firm/brokerage. Sometimes, you will want to look at homes offered by for sale by owners. For sale by owners generally have a harder time selling their home because they do not offer a commission to the selling agent. However, in today’s market most FSBO’s are willing to pay a small commission to the selling agent as the market has slowed down and buyers are much harder to come by.

What is the Average Commission?

When we show you a home that is listed through the Multiple Listing Service (MLS), the listing agent (representing the seller) will usually offer us the industry standard 3% commission of the final sales price. We will usually list a home at a fair % and offer 3% to the agent that sells the home. In most cases, a for sale by owner will offer the selling agent 3% to cut the total average 6% commission in half. If this is the case, then we will not have an issue and will show you the property. However, if the FSBO is not willing to pay the 3%, it will have to be negotiated within the contract between you and the seller. Again, we will explain these issues before we start our search for your next home and if you should not agree to paying part of our commission in these types of scenarios, then we will agree with you not show you any properties that are listed for sale by owner.

The Breakdown

The listing brokerage gives us 3%. However, this commission usually is split between the agent and the company they work for. Even if we spend 100 hours representing you and helping you, if we can’t get you to the closing table successfully, we do not earn any money. On any real estate transaction, an agent will earn roughly 1.5%-2.5%, after the split with the company or brokerage the agent is working with (a well deserved cut, when you consider you don’t even pay us this fee).