Where Does a Realtor’s Commission Go?

A realtor’s 6 percent commission may seem like a lot, but that figure gets divided many ways. When a realtor quotes that number to you, keep in mind the places their, and your, money is going.

Commission Only

Most realtors are not salaried employees, they work on commission only. If they don’t close deals, they don’t get paid. It’s hard to find business in busy cities where many realtors compete with each other. It’s in their best interest to try to get the highest commission possible, since your home might be one of the few deals they do this year.

Office and Service Fees

Realtors pay for their own license, usually around $500. They also pay for access to the Multiple Listing Service, desk fees, liability insurance and realtor association dues. Simply starting as a realtor can cost well above $1000, with many other fees paid monthly.

Additionally, as independent contractors, realtors usually pay their own federal income tax and health insurance. Normally this is paid for by employers but since the realtor is their own employer, they pay for it themselves.

The Splits

Even with the fees and taxes considered, 6 percent of sale price is still a large amount, especially since it’s coming from your pocket.

That is until it’s split. Immediately, the 6 percent is split in half. The commission is split by the two agents, the one representing the buyer and one representing the seller. After that, the office the realtor works for takes a portion of the commission. That percent often ranges from 20 to 50, sometimes more or less depending on the realtor’s contract and the office’s policy.

Conclusion

Next time you’re looking to buy or sell a home and the realtor quotes that high commission, keep in mind that most of the money isn’t going into their pocket.

Alternatively, if you’re looking to buy or sell with less hassle, less negotiation and less uncertainty, contact Equity Kept to find out how they prioritize their clients to maximize savings and returns for you.