And most of that 5 percent to 6 percent commission gets split by at least four people, and sometimes six, if referral fees are involved. First of all, the fee is split in half between the listing and selling broker. So each brokerage company (listing agent and buyers agent) gets 2.5 to 3 percent of the sales price.
The individual agent then splits that with his or her broker at varying amounts, sometimes in half, so the agent is now down to 1.5 to 2 percent of the sales price. For that money, the broker provides a bricks and mortar office, copy machine and a host of other services.
Add to that, the agent pays national Realtor association dues, state Realtor association dues, local association dues, electronic key fees, car expenses and errors and omissions insurance, among other expenses.
Sure, there is some room to breathe, maybe, for some people. But not a lot. Agents won’t negotiate commissions because if they did, they would be working for no pay. And, like everything else in life, with discount brokers you are likely to get what you pay for.
There is a reason people continue to pay 5 percent to 6 percent to real estate companies — and not directly to the agents. It’s because they want it done right.
Thank you for listening. My suggestion is to research and write another article presenting this side of the story.
By the way, I do acknowledge that not all agents are worth what you pay them, but I’ve been a Realtor since 1987, and the majority are. Thanks for all your information. I really enjoy it and it is often very useful.
A: Thanks for your question and for breaking out how agents get paid.
You’re right: There’s a strong misconception that the listing agent receives all, or the majority of, the commission. As you note, the buyer’s agent and seller’s agent each receive about 25 percent of the commission that’s paid, or 1.5 percent on a 6 percent commission. The brokerage companies divide the rest, typically 1.5 percent each.
Rarely, the commission that’s paid is split unequally between the parties. When that happens, sometimes the buyer agent receives more (because the seller is trying to attract more buyers, and, well, money talks). But usually the commission is split equally.
You raise a good point about the expenses that go into running a real estate brokerage. In addition to the expenses of running an office (including advertising, an office lease, signage, phone numbers, MLS access and technology, among many other costs), brokers spend money to train agents, hire support staff and keep the agents who join them. Some of the documentation expenses are now being passed along to the buyers or sellers.
Being a real estate agent is expensive, too. As you point out, there are national, state and local dues to pay, office expenses (some real estate companies charge agents for use of office equipment, copying documents and the time allocated by support staff), insurance premiums, outside advertising expenses, and the costs of wining and dining clients.
The truth is, there’s plenty of money in these deals for agents (on both sides) who are good, who hustle and who work hard. If you’ve been in the business for 30 or more years, then you know how to do all three.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, ThinkGlink.com.