Real estate agent commissions or realtor commissions are fees paid to the listing (representing the house for sale) and selling (representing the buyer of the house) agent at the close of a real estate sales transaction. These fees can vary from one real estate deal to the next, or real estate agency, or market region. Realtor commissions are usually determined by the real estate office, agency, or market region.
Commissions are shared between the listing and selling agents. Furthermore, the "house" or real estate agency for each agent gets a cut. An average commission breakdown follows:
House sales price: $200,000
Commission percentage: 6%
Total commission: $12,000 (6% of $200,000)
Listing agent percentage: 3% (of $200,000) = $6,000
Selling agent percentage: 3% (of $200,000) = $6,000
But each of the agents may not actually pocket $6,000. The real estate agency still needs to receive its percentage of the commission.
Real estate agents and brokers need the agency for different reasons.
The real estate agent needs the agency since it is illegal for a real estate agent to represent buyers or sellers in a real estate transaction without first signing with a broker's agency.
The real estate broker needs the agency since it is expensive and difficult to perform as a solitary broker without the overhead, i.e., advertising, marketing, phone, desk, and so on, that the experienced agency provides.
The real estate agency provides many necessary services for both agent and broker. Of course the broker can start his or her own agency beginning at $10,000-$20,000. As a small business owner, the broker agency can look forward to startup costs that include physical location and building costs, liability insurance, broker and association dues, state employee costs and taxes, small business taxes, and so on.
In return for this service, the agent gives the agency a part of his or her commission (agency fees) depending on the agency commission structure. The average commission structure between agent and agency varies. For example, a commission split between agency and agent could be 50/50, 60/40, 70/30, or 80/20 depending on the experience and value that the agent brings to the agency.
So, instead of the agent receiving the full $6,000 in the above example, his or her commission may actually be $3,000 (50/50 split, agency gets $3,000) for a novice agent, or it could be $4,800 (80/20 split, agency gets $1,200) for a seasoned agent.
The 6% real estate agent commission on a house sales price may also vary a little less, a little more depending on the region. Commission splits between listing and selling agents can also vary, i.e., 2%, 3%, or 4%.
Also, an agency can perform "in house" sales where both the listing and selling agents reside within the same agency. An agent can "double-end" a real estate transaction, representing both the listing and selling of the property with proper disclosure. In this case, the agent keeps the full 6% minus the agency cut and other operating costs.
Of course, a FSBO (for sale by owner) may choose to opt out of using a professional real estate agent. That is, homeowners may choose to save the real estate agent commission costs by selling their homes themselves. But, prospective buyers may shy away from the homeowner because of his limited expertise in real estate transaction documents, intentionally or unintentionally omitting property details, sharing of closing costs and property fixes, and so on. Plus selling one's home is time consuming and inconvenient: holding open house and advertising. Using a professional real estate agent is the most assured way of maximizing both the seller's asking price and buyer's offering price.
Another advantage of using an agency or agent is that most agencies subscribe to a multiple listing service (MLS). The MLS helps to maximize the exposure of your home to other agents and buyers.
In summary, real estate agent commissions, vary between real estate transactions since commission percentages can differ between agencies and real estate regions.
