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Here's the skinny on real estate commissions

 

Last updated 4/22/2019 at 12:24pm



ESCONDIDO – After receiving calls for real estate advice or consultations, I’ve heard these words many times.

“Thanks so much. How much do I owe you?”

People are always surprised by the response – nothing.

The general public, I believe, is under the misconception that if someone charges for a service then it must be a better quality than a service that is free. For example, many lawyers and accountants charge upward of $250 per hour. Realtors also provide a service, yet in most cases they do not charge by the hour.

A Realtor represents either a buyer or a seller in a real estate transaction. Traditionally, sellers agree to offer a previously determined percentage of the sales price in exchange for a successful closing and all that goes along with it. For example, a seller could sign a listing agreement and offer to pay 6% of the purchase price in real estate commission. This 6% would be shared in equal parts between the buyer’s brokerage and the listing agent’s brokerage, and it is reduced from the seller’s net at the end of the transaction.

Say, for example, that the sales price is $500,000. Six percent of $500,000 would be $30,000. The $30,000 would be shared between the brokerages of the listing agent and the selling agent.

Agents make a lot of money is a common reaction when people hear that an agent will be make about $15,000 for what sure sounds like a lot of money for one transaction. And, $15,000 is a lot of money; however, that $15,000 does not go directly to the agent who represents the buyers or sellers. The agent must share it with the brokerage and pay for advertising, errors and omissions insurance, office fees and any other expenses associated with the transaction. Additionally, as an independent contractor, the agent will pay income taxes on the net real estate commission.

Believe it or not, Realtors do a lot of things for free. Since agents do not charge by the hour and only make money when deals close, they frequently prepare comparative market analyses, attend and host open houses and prepare marketing materials – all without being paid a penny.

While it is always nice to hear the phrase, “How much do I owe you?” My answer is simply, “You do not owe me anything for this appointment. I do hope that you will please keep me in mind for any future real estate needs and feel free to refer me to anyone you know who might benefit from my services.”

If you or anyone you know is seeking to buy or sell, my office can help. Feel free to contact me if you have any further questions.

The post “Spotlight: The Skinny on Real Estate Commission” appeared first on Broadpoint Properties’ website, https://servingsandiegocounty.com.

Submitted by Elisabeth Hartig Lentulo, broker associate.

 

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