HOW REAL ESTATE AGENT COMMISSIONS WORK – KEVIN WARD


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Real estate commissions are 100% negotiable. The usual full service commission is 5-6%. A discount commission is 3-4.5%.

A Flat fee brokerage charges a set fee (a percentage of the sales price) instead of a commission. This is paid upfront whereas full service commissions are paid out of escrow at closing.

Commissions are typically split between the listing broker(seller’s side) and the selling broker (buyer’s side). The broker owns all commissions because he owns the listing. The broker pays the agent his cut of the commission (usually a 70-30 split between broker & agent).

When the listing broker puts a listing on the MLS and offers a cooperative offer of commission, it’s traditionally a 50-50 split between the listing side (3%) and the selling side (3%).

Only licensed agents and brokers can get paid in a transaction.

How are referral fees paid? A 30% referral fee (taken out of the listing side of the commission) goes to the referring broker.

Real estate commissions are worth it because clients are paying for the value of the service that a skilled agent delivers. When a skilled agent nets his client the most money, this more than covers his commission.
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