What Does a Real Estate Company Charge for Commission?

September 29, 2020

Selling and buying property is not as simple and straightforward as most of us would like it to be. There are various factors to take into account, as well as things to be done, such as evaluating the property's value (the appraisal), determining how the payment is going to be carried out, as well as picking out the right buyer, sometimes from a crowd of people.

Real estate agents are people who help you get through the whole process relatively smoothly while also keeping your best interest in mind. There are plenty of things that could go wrong during a real estate deal, from failing to sell the property to falling victim to a scam. According to the real estate experts from the Highest Cash Offer, the most common reason behind deals falling through is the lack of an experienced agent overseeing the sale.

Of course, these professionals don't work for free. Real estate commissions are how Realtors make their living, and they're often subject to controversy, mostly due to a simple lack of understanding of how much exactly the agent commission is and why they need to help them along in the first place.

The truth is, real estate commission fees are important incentives that will drive your agent to keep your best interest at heart for one simple reason: if the deal doesn't happen, they don't get paid. This works both ways - for the buyer’s agent as well as the one working for the seller. If you're looking to sell your home or buy one, and aren't exactly sure what to look for in an agent, or why exactly they should get a cut off of the sale of your home, this article will clear out any doubts you might have.

What Percentage Do Most Realtors Charge for Commission?

Every deal is different, and not every home is worth as much money. The commission fees are different in various areas of the country, and they also depend on how renowned and experienced the agent you're working with is. A Realtor accredited by the National Association of Realtors will definitely charge more than a usual run-off-the-mill real estate agent. But they're also much more skilled and, therefore, more likely to get you the best price on your property.

The real estate commission fees are also negotiable, so if you think that your agent is expecting to make a little too much money off of your home, you can haggle with them. Be careful, though -- too small of a commission will disincentivize many real estate agents from doing their best.

The general consensus is that the real estate commission fees fall between 5 and 7 percent of the sale's price, but even that is dependent on a multitude of factors, so don't take these numbers for granted.

How Are Commission Fees Paid Out?

The commission on any home sale always comes out of the final price of the home. This is why agents never get paid in advance -- if the sale breaks apart, they won't see a cent, regardless of how much work they've put into it. In this aspect, a real estate agent’s job is no different from any other commission-based profession.

A lot of people don't understand who exactly pays out the fees. It may be somewhat confusing, as it comes out of the property’s price, meaning that you could say that the buyer bears the costs or that the seller does, and you'd be right in both cases. This is especially true if both parties of the deal work with different agents. The fees are usually split up evenly between the listing agent (seller's agent) and the buyer’s agent. It's not a set-in-stone rule, but rather a common courtesy between real estate agents.

The Dual Agency Conundrum

One of the more perplexing situations that can happen during a real estate deal is dual agency. It occurs when both the seller's and buyer's agents work for the same company. It means that the company in charge of the deal benefits from the same sale twice. An independent real estate agent can also be a dual agent, in which case they are the deal’s sole beneficiary.

An agent working for both sides can significantly expedite the whole process since they are the only person involved when it comes to the technical side of the sale. On the other hand, though, a dual agent can play dirty and lead to a home selling at a higher price than it really should, simply because they had all the cards and could manipulate the parties to get the most cash possible. This is also the reason why the practice of a dual agency is illegal in many states.

Alternatives to Commission Fees

Many people who work in the field believe that percentage-based commission fees don't always reflect the work put into a deal by the real estate agent. Sometimes, a piece of property is up on the market for what feels like ages, during which period the agents are responsible for holding endless open houses and marketing the home in a wide plethora of other ways. Other cases are basically instant -- one day a building is put up for sale, and it's sold less than 24 hours later.

There are listing agents who work on a flat fee, which is established prior to the beginning the selling a home process. Although it may seem convenient for the seller at first since they'll have to pay out the same amount regardless of how high the house price ends up being. It's simple, but it can discourage the agent from trying to get the best price on your house.

The Bottom Line

For all the confusion and misunderstandings that surround it, the agent commission system is set up in a way that can bring the most benefit to most parties involved in a real estate deal. The seller is sure that their agent is doing everything they can to get a good price, while the buyer knows that they won't bear the cost of hiring an agent all by themselves. The commission is a better method of handling agents' fees than any other one, simply because it provides the incentive for Realtors to do their job to the best of their abilities, meaning doing everything in their power to sell your home or find you a new one.

Maciej Grzymkowski - an avid traveler with a particular affinity for Southeast Asia. I love to explore the differences between corporate cultures and ways of doing business in different parts of the world, and I’m always keen on adopting alternative and exotic solutions in my own work.

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Co-founder of Urban Splatter • Digital Marketer • Engineer • Meditator

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