Have you ever wondered the commission you or others pay goes????

Where does the Commission Go?

The whole commission does not go the Realtor^®. In fact, Realtors^® only get a small portion of the total commission. Below is an example of a breakdown of what happens to a commission when it is paid upon closing.

Let’s say you sold a $600,000 house this year and paid 5% commission.

Total commission $30,000.

It is split (say 50/50) between both the buyer’s broker and the seller’s broker. Therefore, both brokers would gross $15,000.

The portion the broker pays out will differ for each listing and buyer's agent depending on their split agreement. Let’s say an average 50%. 50% of $15,000 is $7,500.

Advertising costs including time, flyers, mail-outs, ads in the various papers and industry magazines, open house costs, installation of signs, virtual tour costs, etc. Suddenly of the $7,500, the agent is netting less than $4,500. Under average conditions, the time it takes to list a home, market it to be sold and take it to the closing table is 90 days. If you do the math, and based on $4,500 take home for the Realtor^®, they earned $50 per day while actively selling your home.

If your Realtor^® is highly professional and very knowledgeable about the market and marketing homes, they are worth EVERY penny they earn. Your Realtor^® is responsible for the marketing and negotiations of a VERY expensive product, your home.

Do you really benefit from negotiating a lower commission?

Yes, commissions are negotiable. As mentioned above, the Realtor^® commission is split up in so many ways to where nearly 4 people get a cut and another large portion goes into marketing costs. So, if you are the seller and traditionally a seller pays the commission, you are actually negotiating AWAY your marketing dollars and Realtor’s^® paycheck. In other words, you are negotiating away the earnings of the expert that is supposed to work hard at reaching your ultimate goal…selling your property at the highest possible price with the fewest hassles. When this occurs your Realtor^® has no real incentive to work hard for you and the sale of your house. In other words, a Realtor^® might decide not to market your property as much as they normally would if paid a higher commission.