Real estate commissions are a key part of the money that home sellers pay to sell
their homes. They are paid out to the agents who represent the buyers and sellers in
each transaction. The amount of the fee is determined by the contract between the
seller and listing agent. The contract may stipulate a flat fee or it might be a
percentage of the sale price. The commission is typically split equally between the
buyer’s agent and the seller’s agent, although the contract could stipulate a different
split. The commission is then paid out of the seller’s proceeds at closing.
The broker who holds the real estate license of the listing agent and selling agent is
paid first, and then the agents are paid out of that share. The agent’s share of the
commission is often negotiated in their contracts with their sponsoring brokers and
can be anywhere from 5%-20% of the total commission for large national brokerage
brands like Keller Williams or ReMax. In addition to the commission earned on a
sales transaction, agents also pay a desk fee to their broker to be allowed to work
for their brokerage.
When home buyers are buying homes, they are not paying real estate commissions
to their agents. The fees are borne by the sellers who are paying for the services of
the selling agents and their buyers’ agents. For this reason, it might seem
counterintuitive that the seller would be responsible for paying commission to the
agent who represents a buyer who eventually buys their home. But the reality is that
a good real estate agent will bring a lot of value to the transaction, from guiding
their clients through the home buying process to ensuring that all the legal transfers
of ownership are executed properly. Also read https://www.h3homebuyers.com/
While the traditional model of charging a 6% commission and splitting it amongst
four parties has been the norm for decades, changes are happening. New
technologies and competing business models are disrupting the industry on all sides.
On the buyer side, there are companies offering homebuyers rebates for working
with a specific listing agent. On the seller side, NYC flat fee MLS listing services like
Hauseit have emerged that offer lower rates than the standard 6%.
As a result of these changes, the average real estate commission rate in NYC has
actually started to fall more in line with what is charged in London or Paris.
While negotiating commission rates can be awkward, it is important for both sellers
and homebuyers to understand the current state of the market. Using this
information, it is possible to find the right rate for each situation and avoid a
commission surprise. To help, we have created a simple calculator that can be used
to estimate the cost of real estate commission in NYC and other markets across the
country. Click here to use the free tool.