Real Estate Tip of the Week: Understanding Real Estate Commission
There can be some confusion when it comes to how a real estate agent is paid – and some buyers and sellers might not work with an agent, simply because they don’t know how the agent’s commission works!
This is where we jump in! Check out our guide below on how to better understand a real estate commission and your part in it.
Real estate agents only earn money when a real estate deal has been completed and finalized. Some agents charge a flat fee for their work, or some charge a percentage of the sales price of the home once the deal is finished. The percentage would vary, but the commission is typically 5-6% of the home’s final sales price.
For example, on a $300,000 home, a 6% commission would be $18,000.
Don’t panic – while that might seem like a huge number, it’s usually split up into different parties. That, and an agent won’t receive any sort of payment until the buyer and seller both agree and meet at the closing table.
Surprise! Usually, the seller pays the full commission for their listing (seller) agent and the buyer’s agent. Remember that $18,000 number above? The seller and buyer agents usually split that, with each receiving $9,000. This equal split in commission might vary, however, depending on the agents.
What Commission Covers
Basically, the commission covers all of the hard work the agent did to help sell or purchase your home. An agent helps you price homes, market on social media and the multiple listing service, negotiate with buyers, and help bring the home sale through to closing. And they should, most definitely, help take off some of the stress from your shoulders.
When You Sign the Contract
When you’ve decided on a real estate agent, you’ll receive a contract (usually referred to as a listing agreement) where you can read all the details about their specific commission rate. Be sure to read this contract in its entirety before signing – that way you have full confidence in the services you’re paying for.
For more real estate tips and tricks, stop by Alliance Title’s Blog for more.