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How Do Real Estate Commissions Work?

Jenn LoConte

Jenn LoConte has over 20 years of experience in the fields of public relations, communications, and professional writing...

Jenn LoConte has over 20 years of experience in the fields of public relations, communications, and professional writing...

Nov 29 4 minutes read

If you’re considering buying or selling a home, understanding what real estate commissions are and how they work is essential. Even if you consider yourself a real estate savvy homeowner, there may be a few things you don’t already know.

What is a Real Estate Commission?

A real estate commission is the agent’s fee for service, which is usually calculated as a percentage of the home’s sale price. Sounds simple, but it can be a little more complicated. In a traditional home sale, there are a number of people that are usually involved.  

  • Seller - The homeowner who is selling his/her home.

  • Listing Agent - The individual who is hired by the seller to market and sell the home

  • Listing Broker - The company that the listing agent works for

  • Buyer - The person who is buying the home

  • Buyer’s Agent - The individual who is hired by the seller to find him/her a home 

  • Buyer’s Agent’s Broker - The company that the buyer’s agent works for

Who Gets the Commission?

Once an offer has been made and the seller accepts, both the listing agent and buyer’s agent will negotiate how to split the commission. Traditionally, the percentage will be split 50/50 between both parties. Although you may think the commission goes straight into the pocket of the agents, it actually covers many of the costs of a real estate transaction.”

"At DLP Realty, the commission goes to not only pay for marketing but an entire TEAM of people working to market and sell their home. Our agents only see a small percentage, 10-30%, of what a client pays out,” comments Melissa Woodruff, DLP Realty Sales Solutions Coordinator.

Who Pays for the Commission?

The norm is for the seller to pay commission fees. This occurs at closing (settlement) of the property which again, has already been predetermined and is included in the contract. But, if you’re the seller, don’t get discouraged. Your agent can actually account for the commission costs by asking for a higher sale price of the home. 

How Much Should I Expect to Pay?

The commission is predetermined between the seller and the seller’s agent prior to signing an agreement. Although there are no set amounts for real estate commissions, the usual percentage is between 5 and 6% of the home’s sale price. 

"Commission percentages vary greatly based on the amount of services a Realtor and brokerage are providing, the agreed-upon price of the home, and the current economy,” explains Woodruff. “Commission can always be negotiated but just like anything, there is always a value to the services that you are getting!"

Is It Possible to Negotiate Commissions?

Negotiating a lower commission may be challenging, but there is actually a very easy way to negotiate them!

Join Don Wenner, CEO of DLP Realty and the #1 real estate professional in Pennsylvania and New Jersey, for our FREE webinar where he will explain the NEW way to sell your home, with NO commission and NO fees. 

We Have the Solution! 

Join Don Wenner, CEO of DLP Realty, for our live webinar “How to Sell Your Home without Paying Commissions or Fees”

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