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Meeting with the Realtor Four features that determine highest price CMA- What is your house worth? Consulting with Realtor to determine price
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Commissions explained Traditionally the commission is paid for by the seller from the equity of the house. And for the seller this always seems like a such a burden. It is rarely understood how the commissions paid are "trickled" down to each party, including Uncle Sam. The commissions paid are split four ways. What ever the commission is that the seller and broker agree on, is then split between that seller’s agent and the agent that brings in the buyer. And it doesn’t stop there. Then, each agent (unless a licensed and independent broker themselves) splits their gross commission in half with their broker. Then, Depending on whom the agent works for, if it is a national franchise, there are franchise fees that are automatically deducted from their commission prior to the close of escrow. Some go as high as 8% To better understand this, let’s use an example. A house sold for $200,00 and commissions paid were at 6%. The gross commissions to be split would be $12,000.00. Each side (buyer’s agent and seller’s agent) gets half. So lets work with just the seller’s agent to keep it easier. Let’s say the seller’s agent is at a 50% split with their broker. So the agent is left with $3000.00 gross commissions. Then, if they work for a major company, their franchise fees could be as high as 8%. 8% of $3000 is $240. Minus that from their gross commissions are they’re left with $2760. Their net commissions is $2760, but it doesn’t stop there. Then they have to deduct what costs were invested to market the home (advertising, brochures etc.), these costs come from the agents pocket. And last but not least, being an "Independent Contractor" the agent must deduct about 30% of their gross commissions (in this case 30% of $2760 equals $1050.00) to set aside and pay taxes. Let’s say that marketing cost them at least $500.00, So what is the average agent left with? a whomping $1210 for about 45 days of work. Total commission was $12,000 Split 50/50 between Listing Office & Selling office= $6000 each Split 50/50 between agent and broker= $3000 each Take out 8% for franchise fees=$240 Take out 35% for taxes=$1050 Plus take out $500 on average for marketing expenses. Total left for the agent $1,210.00 That's a big difference from 12,000.00 dollars
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