How do Real Estate Agent Commissions Work?

Whether they are working for a client to sell or buy a home, real estate agents earn their fee through commission which is based on the amount received from the sale. Before enlisting the services of a real estate agent it is important to understand how the commissions work.

Real Estate Agents will work for a real estate broker. The real estate broker pays a real estate commission to the real estate agent. Commission fees can range from a minimum 30% and more of the total commission received by the brokerage. Experienced and top selling agents may receive 100% and pay the broker a desk fee. For listing a client's property and acquiring a buyer, the seller will pay a commission to the broker of which the real estate agent will get a percentage. This is normally a percentage of the sales price. The clients will sign an agreement with the broker.

The commission for a real estate deal is paid from the seller's funds at closing, and calculated as a percentage of the total sales price. The below example shows how a real estate agent acquires their commission:

Total sale price of the home: $500,000
Real estate broker's fee (10%): $50, 000
Your commission fee of broker's fee (50%): $25,000

The commission a real estate agent makes depends on the total price of home, the real estate broker's percentage fee of the sale, and what the real estate agent agreed would be his or her commission fee from the real estate broker's fee. There are a number of real estate offices agencies that receive commissions on a sliding percentage scale. This allows the agency to increase the amount of money they can receive with the more sales they bring to the agency. Commissions among real estate agencies can vary according to geographic location. The commission percentage for commercial properties tends to be higher then residential properties. Because of the negotiations that take place when selling/buying homes, the real estate agent does not always go for the highest amount possible for the sale.

It may seem like a lot of money to spend on commissions for a real estate agent but the value you get makes it well worth the expense. They perform a wide number of duties such as arranging and listing the property, arranging for showings, help with contracts, negotiations, inspections, and closing processes, and have all of the pertinent information about the property, home, community, and neighborhood. The agent will also know the value of the nearby homes, and where all of the amenities such as parks, schools, malls...etc are located in proximity to the property. The agent will also know if an offer for a property is fair.

Because the process of selling or property can be complicated, real estate agents are a valuable tool to making the process run smoother and helping one get a fair price for a home or property. Before you list a home or property, you should consider enlisting the professional services of a real estate agent.