REALTOR® Commissions & Fees: Are You Paying Too Much?

by Sundaybell on July 3, 2012

Real estate sales commissions, or REALTOR® commissions, are fees paid to the listing (representing the house for sale) and selling (representing the buyer of the house) agent at the close of a real estate sales transaction. Traditionally, these fees total roughly 5 to 7 percent of the home’s sale price. With that being said, REALTOR® commissions can vary dramatically depending on the real estate deal, the real estate agency and the market region.

Before you list your property and hire a real estate agent, stop and calculate your REALTOR® commission costs. If this number seems unreasonable, now is your opportunity to negotiate a more acceptable rate.

Breaking Down Real Estate Commissions

As mentioned above, real estate commissions are split between the listing and selling agent. But the buck doesn’t stop there. The real estate brokerage or agency that each REALTOR® works for will also take a cut from these earnings.

Here’s how the average real estate commission breakdown looks:

• House sale price: $200,000
• Real estate commission: 6 percent
• Total commission: $12,000
• Listing agent percentage: 3 percent or $6,000
• Buyer’s agent percentage: 3 percent or $6,000

From there, each agency could take between 25 and 50 percent of these earnings, leaving the agent with between $3,000 and $4,500. This percentage is dependent on the experience and value that the agent brings to the brokerage.

What This Commission Pays For

REALTORS® are paid a commission for various reasons. First and foremost, this is the payment they receive for their services. Real estate agents put a lot of time and effort into their listings and clients, so it’s only fair that they are compensated for their work.

What’s more, it’s illegal for a real estate agent to represent a buyer or seller in a real estate transaction without first signing with an agency. Real estate agencies provide brokers, REALTORS® and agents with the tools, connections and services they need to be successful in the real estate industry. They also ensure that buyers and sellers are provided with a high standard of service and representation.

REALTORS® also rely on their commissions to cover any operating fees and costs incurred during the listing and selling process. These costs range from yearly MLS fees, lock and key box fees, continuing education and ongoing certifications, mileage insurance, marketing – the list is a long one!

Cut Real Estate Commission Costs: Flat-Fee Services

Want to cut your real estate commission in half? Consider opting for flat-fee real estate services instead of a personal REALTOR® relationship. These “a la carte” service agreements enable a seller to pay a broker a set rate for services rather than a commission. This type of agreement is less expensive because it doesn’t require the seller to use the agency’s services for valuation assistance, negotiating, transaction management or showings.

When it comes to buying or selling a home it pays to have an expert in your corner. A REALTOR® will provide you with the support and services you need to navigate the real estate market with ease. That said it’s important to know all your options prior to engaging in a REALTOR® relationship or signing any agreements.  If a lower overall commission is something you are interested in, they can be negotiated provided some of the services of a full-service REALTOR® are things you might be willing to do on your own.

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