Real Estate Myth #1 -  Agents Keep All Commission

No matter the amount of the commission, the reality is that most realtors do not keep "all of the commission." Most agents are only paid a portion based on their relationship with their brokerage and there are very few that get to keep all of the commission from a sale. The commission split varies based on the brokerage, its business model, and an agent's level of production. 

After a sale is completed there are usually additional fees that may come off the top of the commission to be paid to brokerages. Brokerages support agents by providing them with an array of tools and training that can be used to streamline the sale process, making it easier for all buyers and sellers. Brokerage tools may include:

• Customer Relationship Management (CRM)

• Social Media Management

• Electronic Signature Services 

• Agent Productivity 

• Transaction Management 

• Financial Management  

• Data management and security 

• Daily &Weekly training from successful high-performing agents 

Here's an example of how a Realtor's commission structure may work

(*For this example the brokerage will be fictitious)

John Doe is an agent who works with Just Right Realty, his commission split is 60/40 meaning that for every home sold working as a buyer or seller agent he will make 60% of the sale, and his brokerage will make 40%. 

Agent John Doe becomes a selling agent for a client
Agent John Doe and the seller agree that the agency fee will be 5% of the total home sale
The agency fee is split evenly between the buyer and seller agent. 
Agent John Doe markets the home and it sells for $300,000. 
How much is Agent John's commission as the seller agent?

Agent Commission Formula = Home Sale Price x Agency fee * x Commission split

Remember, the buyer and seller agent are splitting the agency fee in HALF

$300,000 x 2.5% seller agency = $7,500
$7,500 x 60% commission split = $4,500

Agent John's commission after the home sale is $4,500!

Here's an example of what an agent's commission would be if a client pays a flat fee  

Agent John Doe becomes a selling agent for a client
Agent John Doe and the seller agree that the agency fee will be a flat fee of $10,000
The agency fee is split evenly between the buyer and seller agent. 
Agent John Doe markets the home and it sells for $300,000. 
How much is Agent John's commission as the seller agent?

Agent Commission Formula = Agency fee  x Commission split

Remember, the buyer and seller agent are splitting the agency fee in HALF

Seller Agency fee $5,000 x 60% commission split  = $3,000

Agent John's commission split after this home sale is $3,000!

I hope this post helps you to understand how agents are paid after home sales are completed! Remember, all agency fees are negotiable. Communicate your home sale goals and budget with your Realtor. You will be surprised at how many good Realtors would put their clients' needs first above their commission as it should always be.

Cheers!

Chelsea McAllister