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As a real estate agent, having secured a deal for someone purchasing or offloading a property, you want to make sure you get compensated adequately for your top-notch negotiation skills. If you’re not a math major, it can be a little difficult to understand how much you’re entitled to when receiving your commission for a successful transaction. Here’s how to figure out your average real estate commission, so you don’t get short-changed in the long run.
Agent commission mainly depends on brokers, people or agencies who hire agents, who receive payments for services rendered during property transactions. Some agents and brokers will agree on a 50/50 split from the gross commission received by that broker during the transaction. However, there is no average percentage or norm to go by and the split may vary in certain circumstances. Additionally, real estate commission, calculated as a percentage of the property’s selling price, can also vary depending on the brokerage. Then the buying and listing brokers involved in the deal would each split their cuts with their respective agents.
So, for example, if a transaction involved a home listed at $250,000 with a 5% rate, that $250,000 would be multiplied by .05, then divided by two. This would leave each broker and agent making $6,250 from the deal. Take away federal and state taxes, as well as office expenses, and you’ll likely end up with about $3,000-$3,500 in net income though.
Any split is negotiable, however, depending on how much business you end up bringing in, with some agents garnering a 90% split for their efforts. But don’t get greedy. Sometimes sacrificing a bit off your split could prove beneficial as you will be provided with improved broker services and guidance with marketing. Brokers are there to help you make money, not take it away from you.
Before you and your broker split commission, a referral fee must be deducted should multiple brokerages be involved. This referral fee originates from one brokerage referring a client to another brokerage in exchange for receiving commission shares earned from a sale while representing that client. The percentage should be subtracted from the gross commission from a property sale before the agent and broker negotiate their own split. A referral fee usually is 25% of take-home commission received after a deal with the client is agreed. Once this fee is removed from the equation, negotiations between agent and broker become more fluid as you split remaining commission earned from that deal.
You can get 100% commission from a sale. But you will have to pay a desk/office fee monthly to your broker, so you don’t technically get to keep that 100%. It’s usually advised, especially to newer agents, to steer clear of this model as those desk and office fees could cost four figures a month. Citing the earlier example, you would receive $12,500 from the deal instead of $6,250 but will have to pay over $1,000 a month for office fees and operations costs. Such fixed costs become a burden and prevent you from making what you deserve.
Sometimes it’s tough to know your true worth, but you should always try to maximize it. With Premier Commission, you can reach your full earning potential. Find out the average real estate commission you are entitled to and make sure you don’t miss out on a dime. Contact Premier Commission to learn more!
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