Many clients aren’t really sure how commissions works when it comes to real estate transactions. Let me help walk you through what you should know about real estate agent commissions.
It is customary on a residential real estate transaction for the seller to pay the commissions for the Listing Brokerage firm. The Listing Brokerage firm is the one representing the seller. Then the Listing Brokerage pays a co-op commission to the Selling Brokerage firm (representing the buyer). The terms of this are clearly written in the Listing Contract that you as the client will sign with the Listing Brokerage firm and the Listing Agent. The co-op commission is one of the many fields shown in the Multiple Listing Service (MLS) but may not be visible to the general public.
Expectations may be different and REALTORS® are sensitive to their adherence to upholding ethical standards, as well as laws against price-fixing and collusion. Typically real estate commissions are six percent. This is normally split three percent to the Listing Brokerage, and three percent to the Selling Brokerage. The Title Company disburses the commissions at closing and pays the Listing Brokerage firm. Then the Listing Brokerage firm simultaneously pays the co-op commission to the Selling Brokerage firm. The brokerages take their percentage which is typically ⅓ earned commission, and then the remaining ⅔ goes to the seller’s agent and the buyer’s agent the final ⅓ goes to the IRS.
What You Should Know About Real Estate Agent Commissions Are Negotiable
What you should know about real estate agent commissions is that they are negotiable. However, that doesn’t mean it’s a good idea to negotiate. Some sellers believe they will benefit by negotiating a reduced commission with the listing agent. The reality is that the listing agent and the selling agent will be splitting the total commission. The selling agent is the cooperating agent who brings the buyer. Given the opportunity to choose, there are the same agents who may decide not to show your home over others because they see a reduced commission rate in the MLS. I work hard for my clients and want nothing more than to have a speedy sale on their home.
A variable commission is a reduced commission if your agent brings the buyer. Similarly to negotiating this is a way to reduce the commissions paid. The reality is you are hiring your agent to market, list, and sell your home. You want your agent to bring buyers to your home for showings and hopefully submit an offer. You do not want to disincentivize your agent from bringing potential buyers to your home. There is typically a “variable commission” field in the MLS, and this may discourage other agents from showing your home. Because if their buyer submits an offer and the listing agent’s buyer submits an identical offer, you will take the listing agent’s buyer offer because it will result in a large net to you. So what you should know about real estate agent commission is that variable commission is not always a good idea.
How Can I Help?
If you would like a breakdown or more information about real estate commission and how hard I will work for you, contact me directly. I want to provide my clients with interesting and up-to-date information so they can make informed decisions. If you think that my expertise and positive attitude might be of service to you don’t hesitate to reach out and contact me!
Would you like more information on the North Metro Denver area or the real estate market specifically? If so click here to download my current market report on the area or visit this link – http://christinakernexpert.com/market-report-newsletter/
Residential Home Specialist & Global Luxury Specialist
Coldwell Banker Residential Brokerage North Metro Office