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Commissions Explained

When a property is sold, it is very likely the sales commission may be divided as many as six (6) times:

  1. The Realtor® selling the property gets a share
  2. along with that Realtor's® company
  3. and if a franchise company, that entity also.
  4. Then, the person who initiated the marketing of the property (the listing Realtor®),
  5. the listing company and
  6. if a franchise company, that entity also.

Many people have the misconception that a "Realtor gets rich" from the sale of a home or land and only needs one or two sales a year to make a good living which is not true. A Realtor® and the Selling/Listing company have numerous responsibilities and liabilities in marketing and selling a property and each is paid a fair share for those responsibilities; The purpose of putting property on Multiple Listing Service (MLS) is to advise about and encourage other Realtors to show/sell the property. Generally, listings that are taken at a lower commission rate are not enthusiastically worked by Realtors.

Who pays the commission? Any of the following ...

  • The Seller
    The Seller has generally signed a listing agreement with his Realtor® specifying a certain fee to be paid.

  • The Buyer
    The Buyer can pay his Realtor® a commission as set out in their written agreement. If this is the case, it would be inappropriate for the buyer's Realtor® to accept any portion of the fee paid by the seller.

  • Indirectly, The Buyer
    Even though the Seller pays the commission out of his proceeds, it has been argued that the Buyer paid the commission as part of the overall purchase price. This assumes* the Buyer could have bought the home for less had it not been listed.

  • Each Party Pays Their Realtor®
    Each party pays their Realtor® as specified in their written agreement.

  • Realtor's® Fee
    Realtors are paid only by the commission generated by listing/selling of property. They are not paid a salary.

*see For Sale By Owner information

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