Wednesday, October 3, 2007

Commissions-Did you know?

In real estate these days there are a lot of misconceptions regarding commissions on property. Like most rumours every new story increases in magnitude so I would like to make it a little more transparent for you and hopefully shed new light on the subject.

There are two parts to a commission in a real estate transaction; the first is the Seller's portion (listing) and the second is the Buyer's portion (CB/co-operating brokerage). What the total commission is determined by the Seller with services selected, marketing costs, what the Seller sets as for the Buyer portion just to name a few things.

Despite misconceptions a REALTOR actually only earns a small percentage of the overall commission. A good REALTOR will have earned their commission many times over. Let us review an example commission of 6% since that is a nice easy number to break apart:

A Seller decides to pay a total commission of 6%. The Seller is giving 3% to the Listing brokerage and 3% to the Co-operating Brokerage (Buyer portion). This fee will stay the same even if it is the Listing brokerage who sells the property-they would get the Buyer portion as well as the listing portion on that case.

Each half, 3% in this example, is broken down like this: Brokerage 1%, Expenses 1%, Taxes 0.5%, Sales Representative 0.5%.

This is an example of how commissions are split but I hope it adds some clarity for you. If you have any more questions please feel free to send me an email and I will be happy to try and answer your question. Also you can visit my website for a list of services and information for buyers and sellers.

Take care,

Adam Mihm
Real Estate Sales Representative

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