The Term Commission Explained

The Term Commission Explained

As a real estate agent our compensation is based solely on commission. So how does this work and where does the money come from?

In most cases there are two agents splitting the commission on a home purchase. With a Buyer’s Agent & Seller’s Agent, the two parties agree on what percentage will be paid. This information is usually presented in the MLS before a Buyer’s Agent enters the picture.  The seller agrees to this when signing the listing agreement.

Typically the commission is 6% of the sales price and the commission is split with 3% to the Listing Agent and 3% to the Buyer’s Agent.  In Washington County it’s often split 3.3% to the Listing Agent and 2.7% to the Buyer’s Agent.

So, who actually pays the commission?

It is not an additional cost added to the home. If the home is marketed at $100,000 and the agreed upon commission percentage is 6%, this does not make the home $106,000.

For the buyer, the cost of the home is the cost of the home, which means that the buyer is not necessarily paying for the commission. This doesn’t mean that the seller’s agent didn’t advise them on what to list the home for, in order to cover the cost of commission.

The seller is taking 6% out of their profit to pay both agent’s commissions, and if the home is valued appropriately, the buyer will get the home for the right price and the seller will make up their profit.

If you have more questions on the ins & outs of what commission means to a real estate agent, feel free to ask!

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