Commissions are an amount of money, typically a set percentage of the value of the property paid to an agent or agents in a real estate transaction. Many people think it is the sellers that really pay real estate commissions, but in fact, it is a combination of the seller and the buyer.
The commissions are normally divided equally between the buyers' agent, the sellers' agent and the real estate companies they are working with. Almost everyone involved in a real estate transaction is part of this remuneration including:
- The buyer who hired the buyer agent for their expertise to help them find their home and negotiate on their behalf.
- The buyer's agent who is doing historic property research for the buyer, pointing out any flaws in a property, using valuable to time to drive the buyer from home to home, and educating the buyer on all relevant real estate aspects.
- The seller who hired the sellers' agent for their experience, and negotiate on their behalf.
- The sellers' agent who provides knowledge in both residential real estate dwellings, real estate contracts, internet marketing ability, connections to other real estate contractors such as photographers, drone photography, stagers, signage and offers access to important real estate tools to help sellers sell their home.
- The real estate company/Real Estate Broker/Realtor share split can also take a portion of the commission. Quite often the share split or the amount the real estate companies take from their associates will range from 30-50% of the gross commission.
Depending on the real estate company office desk fees and office commission share split, the remainder of the commission is used by a listing agent to cover the costs of a professional photographer, Keyboxes, yard sign, MLS Fees, print material, online advertising and so on.
Although buyers agents do not have as many expenses as listing agents, they are still using wear and tear on their vehicles, paying for their gas, client meals while touring homes, and spend several hours setting up the showings and touring properties.
And of course, we can't forget about the taxman. Revenue Canada wants their share too.
If a real estate transaction falls through - Realtors do not get paid!