How To Negotiate Real Estate Commissions
Irrespective of your locality, real estate commissions are usually negotiable. If you inquire from your agent, you are likely to get a discount. However, some agents do not negotiate for their commissions.
How Real Estate Agents Are Paid
Based on the company’s policy and the agent’s level of production, commissions for brokers are based on certain percentages. Normally the top-notch agent is paid at a higher rate than others are. Only licensed real estate brokers are eligible for commissions. However, brokers can subcontract other agents for a split of the commissions…
Why Don’t Agents All Charge the Same Commission?
It is a norm for agents on the same locality to charge almost similar rates. However, the rates may differ depending on whether the broker is; discount agents or top-notch agents or a neighborhood specialist or a veteran or a new entrant to the market or part-time broker. This is why all agents are not of the same caliber, with each getting what they are worth.
Typical Net Profit
This is how agents make their margins
For instance, if a buyer purchases the property from Thomas at $ 150,000, suppose the commission charged is 7%, with 4% paid to the licensed broker and 3% to the selling broker. Thomas’ broker will be paid $ 4500, while Thomas is entitled to 50% less an 8% franchise fee; this means Thomas will receive $ 2070. If Thomas pays overhead expenses of 22% and saves 30% for payment of social security, federal and state income tax, then he will make a net profit of $ 993.60. If Thomas works for 40-hours per week and manages only one transaction per month, then his wage will be $5.78 per hour for that particular month.
Whenever Thomas is lucky to make two transactions per month, then his wage rate will be equivalent that of The Home Depot checkout line clerks. This is not an easy fit for many agents with the majority barely getting by.
This is why Thomas cannot easily accept to offer a discount on his meager commissions when you either ask her to sell your home or buy a property through him. Thomas will be entitled to a listing commission if he is a licensed listing agent and the selling side of the commission if he assists you in buying the property. Hence he benefits from the two deals, which is much better.