Real Estate Commission Basics

The way that the real estate commission is figured out has remained largely unchanged for several years. It is only fairly recently when a few companies began offering an alternative to the traditional model of real estate commission. This changed the face of real estate commission collection somewhat and reflects changing market preferences.

In order to understand how a real estate commission is paid and by who, it would be helpful to know how real estate agents are share in the cooperating commissions. Real estate agents are typically employed by the broker. All the fees that a real estate agent collects will first go through the broker. It is also the broker's job to pay agents the real estate commission and to enter an contract with the seller.

Most new real estate agents get as little as 30% of the total real estate commission received by a broker. Advertising fees and office expenses may further reduce that amount. A top selling real estate agent on the other hand may be able to keep the entire real estate commission and simply pay a broker's desk fee. In between, there can be many other different arrangements depending on the real estate agent and the broker.

When a seller and a real estate agent signs a listing agreement, the broker is typically the only one who can market the property in question. In exchange for getting buyers interested in the property, the seller pays a real estate commission to the broker. This amount is a pre agreed percentage of the property's selling price, and is shared by the listing broker and the real estate agent who closed the deal.

In a sense, it can be said that it is actually the buyer who pays the real estate commission. The final selling price of the property already includes this real estate commission. In cases wherein a piece of property is sold without representation from a broker, the final selling price will definitely be a lot lower. Because the real estate commission is already included in the selling price, buying through a broker will likely cost you more than if bought the same property directly.

Now, some companies have begun offering flat or hourly rates for their services. This is only one of the many changes in the factoring of the real estate commission, and is probably a sign of even more changes to come.

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