Who Pays the Commission on a Real Estate Transaction?
All REALTORS® are required by law to present a Buyer or Seller with the Working with a REALTOR® brochure and to make certain that they answer any questions a person may have about this process. Real Estate commissions are an area that is greatly misunderstood by the general public. In fact a REALTOR® must provide their client with written details of any revenue they will earn as a result of representing a client in a real estate transaction.
The Real Estate Commission Process
REALTORS® are independent businessmen working through a real estate broker.
- All real estate transaction fees paid to a REALTOR® pass through the broker.
- Only a real estate broker can pay a REALTOR® a commission and sign a listing agreement with a seller.
How Are Real Estate Agents Compensated by the Broker?
Agreements between REALTOR® and their brokers vary. New REALTORS® will earn as little as 60% of the total commission received by the brokerage. From that amount, other administration fees are charged to the REALTOR® for office fees, advertising, sign purchases, etc. Top producing REALTORS® may receive up to 100% of the commission and pay the broker a per transaction fee. The balance of REALTORS® fall somewhere inbetween these figures.
Agreements between REALTOR® and their brokers vary. New REALTORS® will earn as little as 60% of the total commission received by the brokerage. From that amount, other administration fees are charged to the REALTOR® for office fees, advertising, sign purchases, etc. Top producing REALTORS® may receive up to 100% of the commission and pay the broker a per transaction fee. The balance of REALTORS® fall somewhere inbetween these figures.
Total Commission
The standard listing contract between a seller and their REALTOR® gives that REALTORS®' broker the exclusive right to market the home. In return the Seller contracts to pay a commission to the broker. Most REALTORS® charge a competitive commission rate - and sometimes this rate is negotiable and sometimes a REALTOR® will refuse the listing if the commission rate offered is not competitive. The Seller must recognize if they don't agree to pay a competitive rate there may not be sufficient funds to attract a Buyer's agent and their home may not sell as a result. In fact it is fairly common for a Seller to offer a commission bonus when their home does not sell in a reasonable time. The commission is normally calcuated as a percentage of the sale price that is split between the the Seller or listing broker and the Buyer's broker.
The standard listing contract between a seller and their REALTOR® gives that REALTORS®' broker the exclusive right to market the home. In return the Seller contracts to pay a commission to the broker. Most REALTORS® charge a competitive commission rate - and sometimes this rate is negotiable and sometimes a REALTOR® will refuse the listing if the commission rate offered is not competitive. The Seller must recognize if they don't agree to pay a competitive rate there may not be sufficient funds to attract a Buyer's agent and their home may not sell as a result. In fact it is fairly common for a Seller to offer a commission bonus when their home does not sell in a reasonable time. The commission is normally calcuated as a percentage of the sale price that is split between the the Seller or listing broker and the Buyer's broker.
Seller's Commission
The split of the total commission between the Seller's REALTOR® and the Buyer's REALTOR® is approximately 50%. However the commission split should favor the Seller's REALTOR® slightly because of the marketing and adminsistrative costs faced by them. And as previously mentioned the Seller may decide to offer a commission incentive to the Buyer's Agent should their home not be selling. So depending upon the circumstances a commission split may be higher or lower for either the Seller's REALTOR® or Buyer's REALTOR®. Your REALTOR® should discuss these various options with you as required. At www.rancherhomes.ca the REALTOR® offers a competitive commission rate for the Seller; discounts for repeat clients; and rewards for customer referrals. Contact scott@rancherhomes.ca for complete details.
The split of the total commission between the Seller's REALTOR® and the Buyer's REALTOR® is approximately 50%. However the commission split should favor the Seller's REALTOR® slightly because of the marketing and adminsistrative costs faced by them. And as previously mentioned the Seller may decide to offer a commission incentive to the Buyer's Agent should their home not be selling. So depending upon the circumstances a commission split may be higher or lower for either the Seller's REALTOR® or Buyer's REALTOR®. Your REALTOR® should discuss these various options with you as required. At www.rancherhomes.ca the REALTOR® offers a competitive commission rate for the Seller; discounts for repeat clients; and rewards for customer referrals. Contact scott@rancherhomes.ca for complete details.
Buyer's Commission
A Buyer normally has the commission paid to their REALTOR® paid for by the Seller. However when a Buyer signs an Exclusiver Buyer's Agreement and should the Seller's commission be less than what the Buyer's REALTOR® will accept then this Agreement may require the Buyer to subsidize the commission to be equal with the agreed upon commission percentage. At www.rancherhomes.ca the REALTOR® will do everthing possible to find you the home you want even if that includes lower than normal commission rates and homes for sale by owner. But commissions in these areas remain negotiable to ensure the REALTOR® is not losing money by managing the transaction.
A Buyer normally has the commission paid to their REALTOR® paid for by the Seller. However when a Buyer signs an Exclusiver Buyer's Agreement and should the Seller's commission be less than what the Buyer's REALTOR® will accept then this Agreement may require the Buyer to subsidize the commission to be equal with the agreed upon commission percentage. At www.rancherhomes.ca the REALTOR® will do everthing possible to find you the home you want even if that includes lower than normal commission rates and homes for sale by owner. But commissions in these areas remain negotiable to ensure the REALTOR® is not losing money by managing the transaction.
In all cases the www.rancherhomes.ca REALTOR®- whether representing the Buyer or Seller - will review and answer any questions relative to the payment of the commission and will present either their Buyer or Seller with written confirmation of what commission they will earn on any Real Estate transaction.
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