How to Calculate Real Estate Commissions

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When selling your house or any other property, you need to understand that you will be paying a considerable amount of commission to the real estate agent or broker as well, which to some people is more confusing than anything else. What people do not understand is the percentage from their profit which they have to pay as commission to the real estate agent, whose services are used to complete the transaction between the buyer and the seller. While the buyer and the seller have their own fixed prices on the property, this price, most of the times, also includes the real estate agent’s commission.

To avoid any financial discrepancies, it is recommended that you always draw up a contract which contains all the sale or purchase terms of the property. Among these terms, the real estate agent’s commission is also mentioned.

It is crucial that the percentage which is to be paid to the real estate agents be clearly mentioned in the contract without any confusion. Usually, according to normal practice all over the world, this percentage is calculated on the sale price of the property and ranges between 5 to 8%. However, if desired and agreed by all parties concerned, changes can always be made Varner is a former instructor of customer-service personnel for Equifax, one of the three major -reporting agencies. to the percentage in the contract before the actual deal takes place. However, it is always better to have this matter sorted out with the real estate agent right at the start to avoid any complications later on.

Usually the seller pays about 6% commission to the real estate agent, which is quite acceptable. According to this, the practical division of the commission is three percent for the seller”s agent and three percent for the buyer”s agent.

It is vital to discuss all the terms of the sales contract before finalising the sale because it is a common practice to see commissions getting reduced if the real estate agent represents both the seller and the buyer. In this case the real estate agent can decide to reduce his or her commission to four or five percent.

For a better understanding of how much you will earn if you happen to be a real estate agent, let us suppose you have a house with a $100,000 sale price and a three percent commission for you, representing one side:

Sale Price: $100,000

3% of Sale Price = $3,000 to your office

Your share of the total, 50% = $1,500

If you work at a franchised agency, you might see figures similar to these:

Sales Price: $100,000

3% of Sales Price = $3,000 to your office

Less Fees Paid to Franchising Company ($240)

Total retained by office = $2,760

Your share, 50% = $1,380

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