Top Real Estate Agencies:
If you know how commissions are split, you'll be in a better position to bargin for a favorable rate.
How commissions are split:
Typically, the real estate commission is split several ways. Usually the listing agency (representing the seller) gets half of the commission and half goes to the selling agency (who represents the buyer). Thus, on a 6% commission for a $300,000 sale, the split would provide $9,000 to each brokerage firm.
Within each company, the agent involved in that sale would get a percentage of the $9,000. The common arrangement for a newer agent is the company would get half and the agent would get the other half, or in this example, $4,500 each. More productive agents or “top producers” would get a larger cut, upwards of 80% to 90% of the $9,000.
Traditional agents toe the mark:
National companies maintain strong continuity within their organization (high commissions and profitable sales) in order to pay franchise fees, national advertising, administrative and management salaries plus office overhead. They tend to stick closer to their office policy of set rates and fewer discounts.
Agents go where the money is:
In the 60’s, Realty Executives started a concept whereby the agent would get 100% of the commission. A few years later, RE/MAX popularized this concept, attracted top agents from the traditional companies, and eventually became the world leader in real estate sales.
So why don’t all agents go to the 100% real estate companies? The agents may get all of the commission, but these agencies charge their agents a fee, usually in the range of $1,000 to $1,500 per month. The agents also pay for their own advertising. For agents with an entrepreneur spirit, the RE/MAX concept has proven to be extremely lucrative.
Advantage to sellers:
The 100% agencies rely on the agent’s monthly fees as guaranteed income. These offices tend to be more flexible, usually allowing their agents a higher degree of leeway in setting their own commission rate. Agents that must pay a fee every month are often quite willing to reduce their commission just to get listings, which they hope to convert into sales.
RE/MAX is a traditional agency, although their agents have been known to be a lot more commission friendly, especially those in larger metropolitan areas.
Other traditional offices have adopted this commission concept for selected agents, to avoid losing them.
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