Paying a Real Estate Commissions

Paying a real estate commission is a fact of the real estate market that many find to be somewhat troubling. There are a number of reasons why those looking to sell their home are concerned by the commission that will be charged by the listing agent. Since these fees are paid by the seller, buyers are less interested in this figure but sellers need to take this amount into consideration when they are selling their home.

The reason that the commission rate is so important to the seller is that it has a direct impact on the profit that is gained in the sale of the property. There are number of factors that contribute to the financial gain of a profit. This includes the appreciation of the property, the amount of time the property was owned and the commission fees. A commission is a fee that is paid to the listing real estate agent when the property is sold. This fee is usually a percentage of the purchase price of the home. Currently average commission rates are around 5%-6%. This means that the listing agent will receive 5%-6% of the purchase price of the property. For example if a property sells for $300,000 and the commission rate is 5.5%, the listing agent will receive $16,500 when the home sells. It may seem like only a small percentage but often this can prevent a homeowner from listing their home.

Consider the above example where the home sells for $300,000 and the commission rate is 5.5%. Although it is only a small percentage a homeowner who has only been in their home for very long and whose property has not appreciated greatly may not be able to afford this commission rate. However, if the property needs to be sold, there may be nothing that the homeowner can do and they may have to take a loss on the property.

Commission rates are not usually negotiable. Many real estate agents are not willing to negotiate on this term as it is the main source of their income. Some listing agents may allow lower commission rates for more expensive properties but would be less likely to do so for less expensive properties. A real estate agent may also be willing to offer you a lower interest rate if you are a repeat customer. However, these conditions are the exceptions rather than the rule. In most cases, with a new client, real estate agents are very firm regarding their commission rates.

As previously mentioned those who are purchasing a real estate property do not have to worry about commission rates because these are paid by the seller. Does this mean that only the listing agent receives a commission on a real estate sale? Absolutely not. The real estate agent for the buyer also receives a portion of the commission. This agreement is usually made between the two real estate agents and it does not affect those purchasing the real estate property at all.