Sales commissions are split a lot of ways. A real estate agent who lists a property for sale traditionally is paid a percentage of the home’s selling price, and the listing agent typically offers roughly half of that commission to an agent who brings a buyer into the transaction.
There is a declining share of real estate commissions that agents are experiencing. There are many companies that have sought to play a role in real estate transactions for a share of the commission revenue, and these businesses are having an impact on the compensation to agents who are directly involved in home sales.
Some real estate lead-generation companies (including some real estate companies) charge a fixed fee or a percentage of a real estate commission for connecting consumers with real estate agents, this referral fee is in addition to the commission split.
If agents are paying a 35 percent fee (or more) to a third-party (including the real estate company) who referred a consumer work with them, that could mean a 4 percent total commission rather than a 6 percent total commission for a real estate transaction.
Lets look at a commsion split scenario:
Agent Listed: $1,000,000 property at 5%* Commission: $50000 (Wow!)
Sold by Co-Broker: 2.5% Split: $25000 (Wow, again!)
Sub-Total for sales agent & company: $25000 (Not Bad ‘)
New Agent Company Split 50/50: $12500 (Not Great')
Advertising Fee Deducation from commission check: $2083 (some charge this fee for Buyer’s Agents as well) Sub-Total: $10417 (… it took 6 months to sell the property)
Divide $10417 by 24 weeks: $434 (a week)
Agent puts in 40* hrs. a week: $10.85 (an hour) And agent still owe the taxes! OUCH!
Sales agents costs include and are not limited to self promos to get the listing, gas, car insurance and health insurance.
Some companies charge additional fees in their listing contracts. If the agent does not charge
the customer the fee, some companies take that additional fee out of the agent’s commission. $10,417 – $195 (approx. example of additional fee) = $10,322
Million dollar or Luxury Homes are being listed at 4% or less in Fairfield County. New agents are coached to negotiate for 5 and 6% because company policy is not to accept anything lower than 5% without management approval.
Some companies have an additional marketing fee for “luxury properties” at closing that the sales agent pays for. For this additional fee to the agent, an agent receives a limited amount of company made brochures, a limited amount of company made postcards and a limited amount of company run ads in a high-end magazine. Because luxury homes take longer to sell and the Seller demands more advertising, wants additional mailings or the agent runs out of brochures' the agent is responsible for customer satisfaction and the agent pays for these items; whether the agent sells it or not!
Referrals, whether it be the sales agent’s real estate company, other agents or the relocation company, could cost the agent another 33% to 40% of the commission.
NOTE: Even though agents follow proper protocol and discuss commission negotiations with the company manager before offering deals to customers, companies rarely concede their portion of the commission. The agent is usually held responsible for the amount. An experienced agent with a higher split than 50 may be “docked” a percentage to make sure that the company does not lose any money.
All of the above does not include any additional mailings, any additional advertising (advertising that usually done at the discretion of the company) and promotions that you covered out of pocket.
Be clear on “roll backs”, agents may make it up to 55 to 60% only to roll back another 5% during the company’s calendar.
It is a slippery slope to success! “WHAT’S IN YOUR CONTRACT MAY BE WHAT’S IN YOUR WALLET”
Answered about 9 years ago