Understanding Real Estate Commissions
Although few things in real estate are non-negotiable, generally speaking, when a real estate sale is closed, a real estate commission is charged, and that commission is usually in the neighborhood of six percent of the sales price.
Six percent seems like a small amount until you do the math on the sale of luxury real estate and then we are talking about hundreds of thousands of dollars. A hefty sum for sure.
So who gets it? Why is the real estate commission so high?
First you must understand that ninety percent of all real estate agents work on a commission basis, but that really doesn’t tell the whole story. When a home sells, the real estate commission comes out of the seller’s proceeds most of the time. That lump sum is then divided among the players in that transaction. A certain percentage goes to the seller’s broker; a certain percentage goes to the listing salesperson; a certain amount to the buyer’s broker and a certain amount to the buyer’s salesperson. Obviously, if the broker and salesperson are the same person, the minimum number who split the commission would be two, but oftentimes there is a four-way split of the commission.
So, what appears at first glance to be a hefty payoff is really split four ways according to the listing agreement. Remember also that real estate agents, brokers, and salespeople are incentive-driven. There has to be enough of an incentive (commission) to keep the agent driven for success.
Is six percent too high? Is it too low? That is decided by the overall real estate market in general. Supply and demand will determine whether the average commission remains at six percent in ten years or whether it will change.
Do you have any questions about real estate? Give us a call!
Sports Relocation, Inc. Sports Relocation, Inc assist players/coaches of all professional sports leagues including the NBA, WNBA, NFL, MLB, NHL, and entertainers relocate nationwide by servicing their Real Estate & Relocation needs. Ikem Chukumerije is licensed to practice real estate in New York, California, Nevada, Florida, & Georgia. Sports Relocation, Inc operates nationwide and provides elite athlete relocation services in all 50 states and internationally.