The Honest Broker: Real Estate Questions of the Week

The Honest Broker: Real Estate Questions of the Week

When I started writing this blog 4 short months ago, I did not realize the impact it would have on my readers. It has become apparent to me that there is a wide knowledge gap between the “facts and fiction” of what my profession is, and the service it is supposed to provide the general public. I am very grateful for the ability to be a source of consistent education for all who have so many questions and apparently feel they have nowhere to turn to ask them. I have been receiving emails on various aspects of buying, selling, renting, and investing. I thought that if I shared some of these questions from time to time it might help others too shy to reach out to me. The following questions were asked this past month on commissions.

Question: Is it true that all real estate companies charge the seller a 6% commission rate? Answer: No, that is false. Commission rates are negotiable between the seller and their potential realty company. Franchised realty companies; i.e., Keller Williams, Coldwell Banker, Remax, etc., will offer 5% or higher, rarely lower than 5%. However, a non-franchised company, broker owned similar to my own, has the flexibility to negotiate a lower commission rate.

Question: How is the commission distributed?

Answer: For example, a 6% commission is split between the two selling companies; for instance, “Remax” gets 3% and “Better Homes and Gardens” get 3% each. Then that 3% is split again between the company and the realtor that did the sale. Ultimately, the selling realtor gets “paid” anywhere from 1.5% or higher depending on their agreement with their broker. In most cases, there are 2 companies and 2 realtors involved in the sale.

Question: I am the buyer, do I pay my realtor?

Answer: No. This is a question that seems to come up a lot. The answer is that the seller, in essence, pays for your realtor through the commission. Sometimes, a buyer’s agent can spend months helping someone find a property by emailing listings, along with driving them to showings, etc., and for some reason, the buyer doesn’t purchase with the agent or decides against purchasing. In that case, the agent will not get paid because there is no closing on a property.