Realtor Commission Dissected…How much Does a Realtor REALLY MAKE?
I have had question over question about commissions and how it works from clients. It’s hard to believe that so many people do not understand how the commission split works. So I will explain…
There are two separate sides representing each client in real estate, the Buyer and Seller side. One RealtorÒ works for the Seller and the Seller only, the other for the Buyer. If you go to open house and decide you want to buy that home, the agent who has the house listed should disclose that he works as the Seller’s agent, if not ask. Otherwise if you decide to buy that house through that Realtor, they will get the entire commission or a “double bubble”.
That Seller’s Agent will be more than willing to pull comps and market prices of sold homes in the area for you but cannot represent you “solely” and can tell the Seller everything you discuss because there is no "exclusive representation" for you as the “Buyer” – good luck putting in an offer and negotiating it fairly.
If you insist on negotiating everything on your own, (without a RealtorÒ because you “want to save more money”) price the property, negotiate terms, concessions, closing, etc., or you can hire an attorney that charges $300/hour to do so – it’s not rocket science but having someone that is “experienced” is what gets the deal done and closed in time without any hiccups.
Here’s a breakdown of a typical commission:
If commission is 6% of sales price and home is listed for $359K, $21,540 of the commission is going to the listing office. The listing office gets this amount whether or not you are individually represented or not.
If you are being represented by a Buyer’s Agent, then half or 3% of that $21,540 will go to the Selling agent or your agent, $10,770. Of that amount the broker that both agents work for will take 50-60% of their commission or $5,385.
Now each agent has $5,385 but is now left with expenses that were used to market the home or find your home like, MLS dues, RealtorÒ fees, sign postings, advertising, open houses, brochures, lunches, gas, etc. - typically $300-$500, so the agents now get a check for $4,885.
But let’s not forget Uncle Sam, state and local taxes < $1,200> now the Agent gets a whopping $3,685 for a house listed in January 2008 and sold 10 months later earning each agent a whopping $92 a week.
So don’t cry about commission, just make sure you have a great RealtorÒ that will dedicate themselves to making you the most money or saving you the most money.
In these tough times, everyone has to make a living, so be understanding.
If you are still confused, post your comment and I will try to elaborate further.
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