Many buyers and sellers are not familiar with how Realtors are paid. Sellers almost always pay the commissions for both the seller and the buyer.
Here is a summary:
1. When a seller lists their home, they agree to pay a commission (example 7%) to the listing agents company.
2. When the home sells, the listing company charges that 7% at closing, but they pay a percent out (example 2.7%) to the agents company who brought the buyer.
3. Both the listing agent and the buyer agent have an agreement with their broker (company) about how much of that they will get paid (example - 70% of the 2.7%).
Here is a diagram to help illustrate it:
Here is an example in monetary terms.
John is a realtor and works for Company ABC. John charges 7% to list and sell a house, and he pays out 2.7% to a buyers agent. He has an agreement with his broker ABC that he will get 70% of commissions on what he sells.
John has a house listed for $120,000.
Sarah is a realtor and she works for Company XYZ. She has an agreement with her broker XYZ that she gets 75% of commissions on what she sells.
Sarah brings a buyer through the house John as listed. They write an offer for $100,000, and the seller agrees to it.
At closing, Company ABC will get 7% of the sale price ($7000). Now, Company ABC must pay 3 other groups - John, Sarah, and Sarah's Company XYZ.
Company XYZ will get 2.7% ($2700), and they will pay Sarah 75% of that ($2025).
Now, Company ABC has 4.3% of the original 7% left ($4300). Of that, they pay John 70% ($3010).
Hopefully this explains any questions you may have about the process!
Lindsay Quady
www.thequadygroup.com
763-614-3451
lindsayquady@edinarealty.com
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