Understanding How Realtor® Commissions Work
Tip: By Law all fees paid in a real estate transaction must pass through the broker. Only a real estate broker can pay a Realtor. Brokers pay the agents, typically as part of written independent contractor agreements.
Commissions paid by a seller are divided:
We have found through the years that a lot of buyers and sellers are not aware of how Realtors® Commissions work:
About half of the commission goes to the listing side and the rest to the selling side (buyers) ; it's not always a 50/50 division. To understand who pays real estate commissions -- whether its sellers or buyers or both -- first take a look at how realtors are paid and how they share.
Divisions vary; new agents can receive as little as 30% to 40% of the total commission received by the brokerage. From that amount, other fees may be deducted such as advertising, sign rentals or office expenses. Some Top producing realtors might receive 100% and pay the broker desk fee. Everybody else falls somewhere in between. How realtors are compensated by the Broker is important and often misunderstood. Splits vary among brokers, depending on policy and production.
Commissions are not set as standard and are covered by Antitrust Law and cannot be discussed between Broker to Broker. The most common type of listing agreement between a seller and broker gives that broker the right to exclusively market the home. In return for bringing a buyer to the table, the seller agrees to pay a commission to the broker. Typically, this fee is represented as a percentage of the sales price and is shared between the listing broker and the broker who brings the buyer.
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