The Primary Real Estate Commission FAQ Answered

The real estate world is competitive and challenging, but it also offers diversity and plenty of room for growth. So if you don’t want to be chained to a desk, in a boring 9-to-5 job, you may feel better in a real estate agent position.

True, it takes some work to get there (you need to pass the real estate exam) and then you’ll have to work under another agent for a while (to learn the ropes). However, once you do your apprenticeship and start getting customers of your own, things will become quite interesting.

Still, it’s important to know that it’s not easy to become a high-earning real estate agent. It is possible, but it does take time and hard work. Plus, to work with the best customers, you need a few must-have skills such as good communication, a friendly demeanor, quick problem solving, and a thirst for knowledge.

Also, real estate agents work on commission. This means you won’t get paid if the transaction doesn’t go through (one of the parties changes their mind). Not to mention that the commission in itself can be an elusive beast that seems large at first. But by the time it reaches your account it’s a lot smaller.

So before you even start to think about becoming a real estate agent, have a look at some of the most common FAQs when it comes to the real estate commission.

What Exactly is the Real Estate Commission?

Everyone knows that real estate agents require a fee, which is a percentage (around 5-6%, but it differs depending on the location) of the property’s selling price. But why do real estate agents charge this fee and what does it cover?

This fee covers the agent’s efforts to sell the property at a fair price, the successful transfer of property, and everything that happens in between the moment the property goes up for sale and the actual purchase.

The commission is usually established ahead of time when the contract is signed between the buyer/seller and the brokerage agency.

How Do You Split the Commission?

On the surface, the real estate commission looks like something easy to calculate. Just apply the rate you initially agreed on and get the total amount!

However, it’s important to keep in mind that the overall structure of the commission is a lot more complex. Many times, brokers need a special tool (like these free real estate commission calculators) to make sure everyone gets their fair share.

First of all, the commission is usually split three, or more, ways:

The buyer’s agent
The seller’s agent
The broker(s) – in some cases, the agents representing the buyer and seller are backed by the same brokerage agency.

Second, once the entire amount is calculated, you also have to factor in other elements such as concessions, seller credits, home warranties, and more. Overall, the final sale price and the commission are a lot more complex to calculate than it seems.

Who Pays the Commission?

Unless stated otherwise, the seller (the one owning the property) is the one who pays the commission. However, the commission is integrated into the overall value of the property. So the buyer also pays part of the commission when they agree with the final amount.

Wrap Up

The list of questions can easily continue. But when it comes to the commission, people want to know clearly how much it is and who pays it. If you can answer these questions and others with relevant and valuable information, chances are you’ve got what it takes to be a good real estate agent.

However, in order to stand out, you may want to define a personal brand and specialize in a niche. Otherwise, it will be difficult to move forward since there are many good agents on the market.