How Real Estate Commissions are paid

In traditional home sale transactions, the seller pays the agreed-upon commission amount to the agent on closing day. It is important to understand that that commission amount will be split between the seller’s agent and the buyer’s agent.
Obviously, the broker for whom the agent is operating will require payment as well. This is primarily because the broker almost always covers the telephone, advertising, travel and other expenses incurred as the agent operates on your behalf.
The seller’s agent accepts a check on behalf of the broker. That amount is most likely split in half, with the buyer’s broker receiving a check from the seller’s broker. The agents are paid out of those amounts. Both agents can probably expect to receive an equal payment as a result of their participation in the sale. They will probably earn around 40% of the actual commission rate.
Here’s an example of how the commission payment might be calculated:
Home sale price: $100,000
Commission rate: 6%
Commission amount: 6% of $100,000 = $6,000
Listing broker’s commission: $3,000
Buying broker’s commission: $3,000
Listing agent’s commission rate: 40% of total commission
Listing agent’s commission payment: $1,200
Buying agent’s commission rate: 40% of total commission
Buying agent’s commission payment: $1,200
As this example illustrates, commission amounts are fairly insignificant when compared to the home’s sale price. After all, 6% is not a very large amount for most home sale transactions.
Sometimes this breakdown will not be accurate. Higher performing and more seasoned agents usually require a higher commission rate. Therefore, when selecting an agent to sell your home, you should always know in advance what his or her commission rate will be. To maximize your profit margin, you will probably need to interview several potential agents prior to listing your home for sale.
If, after reading all the information above, you are still unsure about the way that agent commissions are calculated and paid, just ask your questions. A good realtor should always be willing to provide agency-specific information.
Realtors are working to generate income, but their first priority should be to sell your home or to help you find your next home. Seek a realtor who truly treats selling homes and helping buyers as his or her top priorities. Then you can benefit from the realtor’s expertise and many years of experience as you move on to the next stage of your life – home ownership.

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