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Agent Compensation

How are real estate agents paid?

Real estate agents (and the brokers with whom they are licensed) are usually paid a commission. A commission is a fee, often calculated as a percentage of a home's sale price, paid to a real estate broker. The broker then divides this fee, sharing it with the real estate agent and cooperating broker/agent (if any) in the transaction. Often, a flat fee is charged up front to cover expenses. Fees are negotiable. An agent skilled in marketing, negotiating, and in closing the transaction often can make you more money than the fees you pay them.

Payment for real estate services may also be charged as a flat fee, irrespective of sale price.

How are buyer's agents compensated?

It used to be that seller-only agency was "customary" in residential real estate. The real estate commission was thought to be paid by the home's seller, deducted from the home sale proceeds at the time of closing. Real estate agents and brokers represented the interests of the property's seller; the buyer was unrepresented in the transaction - and usually not even aware that this was the case!

This "conventional wisdom" changed across most of America, during the 1990s: without buyers, nothing sells. The real estate commission is derived from the proceeds of the home sale, and is really paid by both buyer and seller. Both parties are entitled to an "agency relationship," and the representation it entails.

With the advent of buyer agency, home buyers are now able to be fully represented by a real estate agent in the purchase of property. In most states, it's rare that buyers would pay their agent/broker directly for services in finding and purchasing a home. If a broker does charge buyers a direct fee, it should be outlined in an exclusive agency agreement that the buyer signs when engaging the broker.

When a buyer is represented by a real estate agent, she/he comes to terms on which services the buyer-client is seeking, and the manner in which the agent will be compensated for providing those services. In most cases, a fee or commission is still derived from the seller's proceeds of sale, and shared between the seller's (listing) and buyer's (selling) agents and brokers.

What does a real estate commission typically include?

Real estate brokers must independently determine their costs of doing business, calculating both fixed and variable expenses. In addition to maintaining their office's business environment, brokers incur many costs as they market and promote their listed properties. Some companies market all of their listings consistently - in classified ads, home books and other print media via television home shows, Internet Web sites and telephone hotlines.

Other companies vary, allowing individual real estate agents to select which marketing their clients will have. Be sure you know what you're being offered. Regardless of how many or few services you're selecting, the commission generally remains a "standard" fee, stated in the company's listing agreement as a percentage of the eventual sale price. Often, there is an additional flat fee to cover up front expenses.

Is commission negotiable?

Yes, in every state and on every transaction, commission is by law negotiable at the time it is established. In most cases, this means that the commission will be established between the seller and the agent who lists his/her home, long before a buyer is present.

Buyers and sellers should refrain from attempting to negotiate commission at the closing table, when an offer to purchase is presented. At that point, a specific fee has been established for services from the real estate company; those services have resulted in the sale of the home. Payment should proceed as it was contracted. Think of it this way: would you ask a doctor to lower a fee, after your appendix was successfully removed?

How might payment of a buyer's agent differ from a "traditional" model?

One scenario might involve a home buyer, her broker and agent becoming parties to an Exclusive Agency Agreement, which could state the terms and conditions that will result in a fee paid "out-of-pocket" by the purchaser. When a home is chosen, and a contract for its purchase is written and accepted, the buyer could pay the fee as outlined in the agreement.

Another scenario might involve a buyer who must find the right house within a tight timeframe. Not just any house - but one overlooking a lake, with boat dockage and an in-law suite. Locating such a specific property quickly may require exceptional work from a broker/agent, and the home buyer might agree to pay a cash "incentive."

Is it wise to offer a "bonus" to the agent who sells my home?

Perhaps - if there are extenuating circumstances that might make your home a particularly difficult sale. Discuss any such items (need for a fast sale, lack of marketability, etc.) with the real estate professionals you interview.

Net Proceeds

It's a major concern for every home seller - How much will I make from the sale of my property?

Your RE/MAX Allegiance agent can compute that answer before you even place your home on the market, calculating backward from an estimated "gross" sale price. He or she will deduct your approximate closing costs, the real estate commission and any other fees or deductions specific to your property and its sale.

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RE/MAX Allegiance
6226 Old Dominion Dr
McLean VA  22101
(703) 237-9500
Real Estate License # 0226 026842
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