clock menu more-arrow no yes mobile

Filed under:

Curbed U: How do brokers' commissions work?

New, 2 comments

Broker's fees don't necessarily have to add to the confusion of real estate transactions, although it's not difficult to see how that could be the case. First, it's crucial to understand the broker/agent dynamic. All real estate agents work under a broker as independent contractors when they help buy, sell or lease a property. This is because all real estate licenses must be placed under a broker's license. What's the point? It typically means that agents are paid as a cut of what's owed to the broker; in other words, there's a split. The broker gets a certain point of the selling price, and his/her agent pockets part of the pie. The split can be any number of ratios; the other common scenario is that the agent pockets the full commission by paying the broker a monthly "desk fee." This is usually only the case with more seasoned agents.

The seller usually shoulders the commission being paid as a percentage of the sales price — typically it's around 6 percent. These funds are divvied up at closing. There are three common ways this goes down: First, you have open listings, which are usually utilized by "for sale by owner" sellers. It gives agents the right to collect commission if they bring a suitable buyer to the table. There is no one being paid to represent the owner, and they aren't very popular with full-service brokerages.

Exclusive agency listings give the seller representation, but he/she still reserves the right to sell the property on his/her own, which would mean no commission paid.

However, the most common agreement is the exclusive right to sell. This one's pretty self-explanatory: The agent has an exclusive right to earn commission by representing the owner and bringing a suitable buyer. On the buyer's side, an agent might ask you to sign an agreement stating that you will work exclusively with them in your home search. This is in hopes that they don't waste time showing you property only to have you use a different agent for the actual purchase.

— By Curbed Atlanta contributor Jonathan Carnright