Ah, the real estate agent commission. One of the biggest topics of confusion in real estate transactions might leave you wondering if you’re getting a fair deal on your home’s sale. How much money is going into my agent’s pocket, anyway, and is it justified?
That’s a fair question! In this article, we’ll aim to answer your questions and crunch the numbers for you.
The Real Estate Commission Distribution
Fact: Buyers and seller’s agents won’t receive a dime until your home sale is complete. Most agents are paid on commission and do not get paid a salary or hourly wage to sell your home.
Sellers pay real estate commissions which are usually 6% of the home’s selling price, but they may consider less depending on your state or unique situation. You won’t pay your agent directly with a check, as the money gets wired to your agent’s broker. Agents work under a broker (unless they have a broker’s license). The example below illustrates how commissions are paid:
Math Example: Let’s say your house sells for $300,000. A 6% commission gets paid to your agent’s broker, who then splits the commission between the sellers and buyer’s agent. That 3% commission or $9,000 gets split between your agent and the broker. In a 50/50 commission split, that would mean your agent would take home $4,500 before expenses or taxes. If your agent has many years of real estate experience or is a top-producing agent, they’ll receive a better commission split.
Reality Check: What Agents Take Home
Agents typically operate on a commission split, desk fee arrangement, or a combination of both with their broker. Desk fees cover a workspace at the brokerage and are paid monthly. Agents are independent contractors who must pay taxes and other fees like office supplies, transportation, and Internet with the leftover being their income. If you’re curious as to what real estate agents make nationally given their experience level, read this article. Their take-home pay might be less than you initially thought.
Negotiation With Your Agent
Can I negotiate the commission with my agent? Yes.
Some situations may warrant a smaller agreed-upon commission rate, such as:
- Your home’s listing price is high.
- You’re in a seller’s market.
- You brought in a buyer yourself.
- Your agent reduces their job responsibilities.
Your agent may push back if you suggest paying a lower commission, so if you decide to negotiate it is good to have a solid reason for doing so. Remember that top-performing agents are more likely to not negotiate with you.
Why Real Estate Agents Want Your Success
Agents are licensed real estate professionals who have a fiduciary duty to act in your best interest. Generally speaking, agents go into their careers with a passion to assist buyers and sellers with their real estate needs, and the best agents will fight for you. Agents who have been in the industry full-time for more than two years are driven to push forward, especially since their income is sporadic and they may not have a steady stream of clients.
Your Agent Can Help
When working with an agent, make sure to provide your agent with the timely and necessary information to keep the sale fluid. Remember that it’s not just about the commission the agents will receive. Instead, focus on the quality of the home selling process. When you can sell your home for more than you bought it, everyone wins.
The Bottom Line
Selling a home is stressful and full of uncertainty. Having an agent help you navigate through the legal paperwork, marketing efforts, and closing process can relieve some of the responsibilities you’ll have as a seller. The realization that agents have to work very hard for your business should be reassuring, as they must close the deal before they get paid.