The Real Estate Encyclopedia
How Much Are Real Estate Commissions?
Category - Real Estate Information Sources - General Real Estate Information
The amount of the commission paid by the seller is negotiated between the seller and the listing agent before the home is placed on the market.  The commission negotiated includes the total commission due when the property is sold, including the listing agent's side and the selling agent's share of the commission.  Typically, the commission negotiated between the seller and the listing agent is split 50/50 with any broker who brings a ready, willing and able buyer.


With the advent of the internet, some brokerages and agents are offering “discounted” commissions. As with all else in life, typically lower commissions are tied to a lower level of service. If the homeowner only wants to be listed with the Multiple Listing Service and a sign in the yard, then a discounted commission may be right for them. On the other hand, if you want an agent who will actively promote your property to other agents and spend money on advertising, then you probably are not going to get that level of service with a reduced commission.


There are also agencies, which charge a moderate amount upfront plus a very discounted commission rate, to place the home in the MLS system and to place a sign in your yard.  Typically, these companies provide only those basic services and will not make an effort to sell the home.  Their revenue is derived from the upfront charge.


Lower commissions may also be offered if the seller agrees to tie in other services offered by the broker, such as using a specific lender, escrow, settlement, home insurance or title company. Often brokers may have some type of ownership or profit participation in those businesses. The problem with agreeing to tie in to these other companies is that they do not have to be as competitive in pricing their products or services.


Another practice commonly found with offers for reduced commissions is that the compensation is lowered when you agree to buy your next home through the same agent or broker. The reduced commission may only apply to the purchase of your next home or you may be able to negotiate a combined agreement, whereby your selling commission is lower if you agree to buy your next home from the listing broker.  In this case, the listing agent may include those terms in the listing agreement and the seller is bound or will be charged the full commission, if the he/she defaults from buying the next home through the listing agent.  If you agree to a discounted commission scenario, be sure the commission offered to the selling agent in the MLS system is within acceptable ranges for your area, in order to attract the buyer agents to your home.  


If you consider an offer for a lower commission, you should analyze what you are giving up by accepting it. Before making a decision, the homeowner should be sure to ask many questions.
Home Selling Questions - Agent, Offer & Commissions FAQ's
Real Estate Information Sources - General Real Estate Information
Home Selling Questions - General Home Selling FAQ's
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