UNDERSTANDING REAL ESTATE AGENT COMMISSION
Real estate brokerage companies and their agents typically charge for their servies on a commission basis. That commission rate is negotiable, of course, but each company typically establishes a commission schedule in order to be fair to clients and to ensure overhead and costs are covered - just a Wal-Mart does. If you are selling your home, seemingly the smart thing to do would be to just negotiate or choose the lowest commision rate. Right:? Well, not necessarily.
Generally speaking, there are two "sides" to a commission, the listing side and the selling side. The listing agent, the one marketing the property, offers to pay the buyer's agent a share of the commission if the buyer agent produces an acceptable buyer. Of course, those fees are further divided between the individual real estate agents and the companies for whom they work. Some firms elect to divide the brokerage fee equally: A listing firm may, for example, charge 6% commission, and offer the selling firm (the one who brings the buyer) 3% for an acceptable contract. Obviously, the purpose of this offer to split the commission is to provide an incentive to generate as much interest in the listing among cooperating firms as possible.
Other firms may elect to divide the brokerage fee unequally: for instance, they may charge the same 6% brokerage fee, but offer only 2.5% to the cooperating broker, keeping 3.5% in house. Other firms may charge, for example, a 4.5% or 5% brokerage fee, keep 3% in house, and offer the balance to the cooperating firm.
The reason this is important is the affect it has on the incentive to the agent bringing a buyer. As the market continues to balance out, and the available inventory of homes for sale continues to increase...buyers now have choices again when they are submitting offers. This means it important for listing agents and sellers to be mindful of how they position their listings in the marketplace. Unlike the bidding frenzy at the peak of the sellers' market, pricing, condition and offers of compensation will all take on additional significance in securing the best offer for the property.
Because real estate agents are typically commissioned, buyer agents usually charge their clients a negotiated commission, but expect to collect their fee from the transaction. If the amount offered by the listing firm is less than what they charge their client, they will either agree to lower their compensation, or they will look to collect it from the buyer. In some cases, the buyer is unable (or, in the case of VA financing, prohibited by law) to pay the difference, and may seek to offset the difference by making a lower offer on the property. Eigher way, it can have an unintended negative impact on the seller, as competing listings offereing higher commissions are options for the buyer.
Sellers should be careful to insure that they understand the "big picture" when negotiating commissions. What may seem to be a discount or savings may actually result in a listing being less competitive in the market. The best way to select an agent is to focus on the best strategy for maximizing your net profit from the sale...and not to assume that the lowest commission equals to the best deal!
One effective way to evaluate agency services and fees is to ask to see the agent's history of performance. 
An agent who is interviewing for the job of selling your home should be able to demonstrate statistically their firm's track record for what percentage of sales price they get for their sellers. A company that nets the seller an additional 2% on the bottom line and charges a brokerage fee that is one percent higher than some competitors is effectively "saving" the seller 1% over those competitors.
Regardless whether you select ME to market your property, to be an educated consumer and don't be afraid to ask your listing agent what split will be offered buyer's agents and whether that split is competitive. After all, it's your money. 
Courtesy of Yvette Smith, SRES® REALTOR®
WILLIAMSBURG REAL ESTATE
757-753-7472
5350 Discovery Park Blvd
Williamsburg Virginia 23188
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