Ask a Realtor: How does real estate commission work?

Something most people almost always ask is: “How does the commission or fee work?” Usually, especially when dealing with a seller who has never sold before, when you tell them the current average is 5-6% of sale price, they cringe somewhat obviously. However, it’s not as high as you think. Especially when you factor in all the hard work we Realtors put into making the sale happen!

First of all, it is rare that the entire fee goes to the realty firm representing your home. That commission has the very strong likelihood that it will actually be split four different ways. The breakdown is as follows:

One split goes to the listing agent, or in the case of the example above, the agent you hire to sell your home. One split goes to the firm or brokerage the agent works for. This will be a portion based on how that particular firm operates
One split goes to the buyer’s agent, for being the one who found the new owner of your former home
The final split goes to the firm which the selling agent works for. It’s usually split in a similar way as the listing agent’s So, an amount they may start out as an $8,000 commission coming out of the final sale price.

How does real estate commission get spent?

It is actually broken up quite a bit before it hits your agent’s pockets. Considering all of the efforts and costs that goes into marketing your home- including, but not limited to: photography, print media, landing pages on websites, filtering into various real estate sites, hosting open houses, creating and printing flyers, staging if needed, cleaning services, hiring a drone flyer if you have a large property, and potentially so much more –that amount seems much less farfetched. Realtors also have all kinds of fun fees they have to pay.

 Often to the realty firm they work for just so they can use that company’s branding and resources. And, don’t forget!- real estate agents are freelancers, so they have to file their own taxes and pay quite a bit more than the average 1040-filing employee.

So, the next time you or someone you know balks at how much a realtor commission is, remember just how much work and expertise goes into selling your home or helping you buy a new one. It will likely be one of your biggest, if not the biggest, purchases you ever make. Good Realtors take pride in their work, thrive off of referrals. They truly love to help people buy and sell new homes. 

Realtors work closely with you to understand your needs and wants.  They manage every step in between that first meeting, to that first house visit, to the stuff in between attorney review and under contract, all the way to the closing table.

Any questions? Contact one of our agents

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