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Seller Cost Net Sheet

How Do Real Estate Commissions Work?

March 24, 2023

The majority of real estate agents are paid commissions that are given directly to the brokers and are calculated as a percentage of the sale price of the property (commissions can also be flat fees, although such are considerably less frequent).

Real estate agents are salespeople with a license to conduct business under the supervision of a designated real estate broker, who makes sure the agents abide by local, state, and federal real estate regulations. Agents are not allowed to work on their own and cannot be paid directly by their clients in commissions.

Real estate agents are employed by brokers who are free to work on their own. One designated broker works out of each real estate office. All commissions must be paid directly to a broker, who divides them with any agents participating in the deal.

If they are members of the National Association of Realtors (NAR) and abide by its code of ethics, real estate brokers and agents may both use the title of Realtor.

How Do Real Estate Commissions Work?

A listing agreement is a contract that the seller and listing broker sign when a property is placed on the market. It specifies the listing's terms, including the broker's pay, which is typically a commission. The commission is always negotiable, it's vital to remember that. In reality, any attempt, however subtle, by members of the real estate industry to impose standard commission rates is illegal under federal antitrust law.

Although they could be greater or lower depending on the state of the market, commissions typically vary between 5% and 6% of the final transaction price.

realtor showing couple the home

The seller is responsible for paying the commission unless the buyer and seller agree on a split. It may be claimed that the buyer always pays at least some of the fee, either directly or indirectly, as the majority of sellers include the commission in the asking price (by an increased cost of purchase).

With their sponsoring brokers, the seller's agent and the buyer's agent have agreements that detail the agent's percentage of the commission. Any other split they choose is OK; it can be a 50/50 split between the broker and the agent.

How Commissions Are Shared?

Commissions are typically shared between multiple parties involved in a transaction or sale. The specific way commissions are shared depends on the industry, company policies, and the agreement between the parties.

In general, commissions are divided between the salesperson who made the sale and the company that they work for. The percentage of the commission that each party receives can vary depending on several factors such as the size of the sale, the type of product or service being sold, and the individual agreements between the salesperson and the company.

In some cases, commissions may also be shared between multiple salespeople who worked on the same sale or transaction. This may be done on a predetermined basis or through negotiation between the parties involved.

In addition, in industries such as real estate, commissions may also be shared between the buyer's agent and the seller's agent. Again, the specific percentage of the commission that each party receives can vary depending on several factors.

Ultimately, the specific way commissions are shared depends on the industry and the specific agreements and policies in place within that industry.

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8315 W. 10th Street
Indianapolis IN 46234

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