Real Estate Agent Commission - How It Works?

Real estate sale and/or purchase procedure in California is almost same as that of in any other states. There are two basic kinds of real estate agents those who work independently and those who work together forming a real estate agency. These are further divided into three types Buyer’s agent, Seller’s agent and real estate agencies like Dream Equities who work for both buyer and seller.

Almost 90% of the real estate buyers and sellers hire a real estate agent who charges a commission. How much is the commission? There are no specific rules, in other words real estate commission is negotiable. You can set the terms in your sales contract. The bigger and better real estate agencies like Dream Equities may charge you more than an individual agent but them also provide multiple services under one roof. That said, you should remember two most important points about commission

1.    Sales Deeds Include Commission

The rule of thumb is that commission should be included in the sales price. So if the sales price (also called purchase price) is $400,000 and a real estate agency like Dream Equities charges say 5% commission then the net proceedings (barring other closing costs) are $380,000.

Usually the seller pays for the commission however seller and buyer can decide to split the commission or a seller may ask the buyer to assume full amount.

2.    The Commission Is Paid Directly To Only Brokers

A rule of thumb applied all over US. A real estate agent must work under a real estate broker or a brokerage firm. Agents are not allowed to work independently; they have to work under a broker. A broker or brokerage firm will list you house for sales. Both buyer’s agent and seller’s agent work under their respective brokerages. Dream Equities is a real estate agency with experienced brokers on pay roll.

Brokers set the commission they charge for houses sold through their brokerage. Traditionally, the commission is 5-8 percent of the sales price, but again, that amount is negotiable.That said there is no rule on how a listing broker should split his commission with buyer’s broker. They can decide to split the commission 70-30 if they like it. Real estate agents will get their commission from respective brokers which may vary from 50% to 75%.