Real estate agents work on commission, matching buyers of houses to sellers of houses for a percentage of the house’s final selling price. The property seller usually pays the commission on the sale of a home, but the amount she pays usually does not represent an individual agent’s commission. If you own a real estate agency, you’ll need to figure the commission due your agent. Though commonly used to refer to any real estate agent, Realtor is a trademarked term that designates a real estate agent who is a member of the National Association of Realtors.
1. Determine the total commission on the sale of the property. This commission is stated in the listing contract and in the closing documents, and is usually paid by the seller. A common commission rate is 6 percent of the sales price. If a property sold for $200,000, the commission would be $12,000.
2. Divide the total commission among the agencies involved in the sale. If the agency that represents the buyer is different from the agency that has the property listing, the two agencies will split the commission. On a 6 percent commission, each agency receives 3 percent. For the $200,000 home, each agency would receive $6,000
3. Divide your agency’s portion of the commission by the broker split. This is the amount split between the agent who handled the sale and her broker, or the owner of the agency, under whom she works. According to Realtor.com, new agents may split their commissions 50/50 with their broker, while more experienced agents may keep 75 percent of the commission. The broker split is defined by the contract between the broker and the agent. For the sale of the $200,000 home, the selling agent would receive between $3,000 and $4,500.
- If your agency is a franchise of a national real estate firm, you may have to pay a fee to the franchising company for each sale. You may wish to require the agent to split this fee.
- Some agencies offer bonus commissions if the sale is "in house," meaning either the agent represented both buyer and seller or the seller's agent and buyer's agent were both from the same firm.
Items you will need
- Listing contract
- Closing documents
- Agency contract
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