Commissions!

Today, what amounts to a sore subject for some people, paying a Realtor a commission to sell their house.

I was driving thru Royal Oak the other day and I noticed a "For Sale By Owner" sign. We Realtors call such properties FSBO's, pronounced fizz-bo. At the bottom of this Royal Oak "fizz-bo" sign was something else "Realtors 4%." Now what this means is, the "fizz-bo" homeowner is willing to pay a 4% commission to any Realtor who brings him a buyer. The industry standard is 6%, so either this "fizz-bo" thinks he's getting a big savings, or they don't realize how a commission is split! Of course, if he does pay 4%, he is saving money, but the industry standard for an agent who brings a buyer for the property, is 3%.

The standard 6% commission is split 2 ways, 3% to the listing office and 3% to the selling office. So your listing agent doesn't walk away with a 6% commission. Your listing agent doesn't even walk away with the 3% that goes to the LISTING OFFICE! That 3% is divided up between the listing agent, his or her company broker/owner and, if there is a franchise involved, like CENTURY 21 National, there's a franchise fee that both the company broker/owner and the listing agent pays.

A general rule of thumb, on a 6% commission, the listing agent is going to walk away with 1.32% of the sales price of the house, not 6%. So on a sale of $100,000, the 6% commission is divided like this, $3000 for the selling office, $3000 for the listing office. That $3000 for the listing office is then split into $1500 for the listing agent and $1500 for the broker/owner. The broker/owner then has to pay a 12% franchise fee, $180, as does the listing agent. So the listing agents actual take from that 6% commission is $1320 on that sale of $100,000!

And that dear friends, explains how real estate commissions are paid!