Most people don’t give much thought to how real estate agents get paid — or even how they get their commission percentages. But, like it or not, that compensation has to come from somewhere or the industry wouldn’t exist. After all, office furniture, copy machines, and yard signs don’t pay for themselves. Typically, buyers and sellers don’t pay their real estate agents directly; rather, those fees are rolled into the cost of the property sale or purchase.

Most often, the seller pays the listing agent and the buyer’s agent a commission of 5-6% of the property sale price. Since most agents are independent contractors, they typically work through broker firms that have negotiated commission splits with their agents. For example, a large firm might have newer agents start out at a 50% commission split and then ramp up to about 70% take home after a certain amount of sales are reached. Read more https://www.joehomebuyertriadgroup.com/sell-my-house-fast-wallburg-nc/

How much you can expect to pay your real estate agent is usually spelled out in your listing agreement with the broker firm and agent. This will typically include your agent’s brokerage fee, plus the listing and buyers agents’ brokers fee (typically around 2% each). It will also likely have a line item for other expenses that can add up to a big sum, including things like professional photography, marketing materials, staging fees, and the cost of open houses or virtual tours.

Those expenses aren’t tax deductible and are included in the agent’s overall income. In addition, the agent has to pay federal, state, and self-employment taxes as well as business expenses like multiple listing service (MLS) fees, insurance, and advertising, all of which eat into their commissions.

Another thing to keep in mind is that real estate agents are only paid when a transaction closes, so you’ll only get your agent’s commission at the end of the sale if the property sells for what was offered. That means if you tour homes with an agent and don’t buy anything, that agent won’t get paid for their time.

Some buyers may also choose to have their own broker and negotiate a higher commission rate than what the sellers are offering. That’s a good strategy, especially in a strong seller’s market.

If you’re thinking about buying a home, Clever can pre-negotiate a commission rate with a top NYC agent for you. Click here to learn more about how we can help. And if you’re selling, Clever can help you optimize your commission rate and save you money! We’ll do the math and get back to you with options. Contact us today to get started.