General public doesn't understand real estate sales commission splits

By
Real Estate Agent with Alain Pinel BRE 01367196
https://activerain.com/droplet/LkJ

Home Buyers and Sellers, general public don’t understand sales commission splits
Coin split
It’s somewhat annoying that many who have neither bought nor sold real estate property using a REALTOR would denigrate the profession. And even if they have, how little they know or understand about we earn a living and how the commission split works.

During the monster storm Sandy, newscasters interviewed by phone a famous New York  REALTOR  to ask her about the unfinished building where the crane toppled over. The REALTOR talked about why the units at this building would be high-priced ---  besides the location, the views are breathtaking!

After hanging up, one of the newscasters made a somewhat snide comment about the 6% commission that this REALTOR gets from a sale.

Wow....they still think a realtor gets the entire commission, regardless of whether she’s a buyer’s agent or a seller’s agent.

As many articles as have been written to explain how hard a REALTOR works and how the sales commission is divided and shared among the agents and the brokerages, what seems to stick in people’s minds is that “6%”.

The shortcut computation, quite simply,  it's split 4 ways among the

  1. buyer's agent
  2. buyer's agent's broker
  3. listing agent and
  4. listing agent's broker



Perhaps we should keep on trying to educate the public

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Tags:
real estate commissions
home sellers
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real estate commission split
home seller agent

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Rainmaker
1,059,537
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Like you, I often find myself explaining how the commission is split. Not only are people shocked at the split, but hey are surprised by our expenses.

Nov 10, 2012 01:25 PM #1
Rainmaker
422,271
Catherine Ulrey
Keller Williams Capital City - Salem, OR
Equestrian and Acreage Property Specialist

I agree, the general public doesn't understand much of what we do!  I have found myself answering the commission question with x %to the buyer's agent and x% to me and my broker.  Most don't  argue with it.

 

Nov 10, 2012 01:37 PM #2
Rainmaker
710,558
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Sharon --- and even after we explain how much we spend to do our jobs (gas, insurance, office expenses, advertising, client gifts/entertinment, etc) some of them have the gall to ask us to rebate our commission to them. Wonder how sales people at other industries would feel if their customers asked for part of their salary?

Catherine --- I hope clients wont debate our commissions. But there are those who refuse to understand.

Nov 10, 2012 01:44 PM #3
Ambassador
2,013,047
Michelle Carr Crowe,Altas Just Call...408-252-8900!
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

As long as some are willing to discount low, the rest of us will have to suffer and explain the reality of real estate sales.

Nov 10, 2012 01:46 PM #4
Rainmaker
216,493
Christine McDaniel
Coldwell Banker Residential Brokerage Porter Co. - Crown Point, IN
Broker Associate

I always explain the commission split to buyers and sellers alike. 

Nov 10, 2012 01:49 PM #5
Rainer
240,177
Peggy Hughes/pha logistix, inc.
pha logistix inc - San Francisco, CA
SF NYC LA

It is a shame in this day and age that people still get hung up on that "6%", Pacita... Guess it's just one of those things you have to keep repeating and repeating and.....

Nov 10, 2012 02:03 PM #6
Rainmaker
710,558
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Michelle --- I actually saw in a forum a buyer wantint to know how he can prevent his agetn from collaborating with the sellers, so that the buyer gets the commission.

Christina -- and we hope that knowledge sticks....then we have new buyers and sellers who again don't have a clue.

Peggy --- they look at the "6%" and think it's a lot to pay...they never stop to think how it's divided, and how we earn it/

Nov 11, 2012 01:20 AM #7
Ambassador
1,090,616
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

I am always taken aback when a client asks how much I'm making on their sale. I tell them...for one...it's split with buyer and seller broker and agents on both sides get a split. Then I ask them why they asked....because I never asked them about their pay.

Nov 22, 2012 02:47 AM #8
Rainmaker
491,818
Jim Patton
Aspire Home Real Estate 209-404-0816 - Modesto, CA
Realtor - Stanislaus ,Merced, San Joaquin Counties

Pacita - I don't think most people have any idea how we get paid.  

Nov 30, 2012 12:11 AM #9
Rainmaker
120,664
Tessa Skeens
Hampton ReDesign, Home Staging and Redesign - Grand Junction, CO
Staging For Realtors, Builders & Investors

Good point. I'm always surprised that even though a home is usually one of the most valuable assets most people own they still don't have the facts about what costs are involved in selling it. 

What really gets me is when you have a buyer that decides to go it alone (without an agent) because they think it's going to save them money!

Maybe there should be a bullet point on the listing agreement about how the money is dispersed....

Dec 07, 2012 12:06 AM #10
Rainmaker
710,558
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Celeste -- what's even more surprising and somewhat disappointing is when the buyers ask us to rebate our commissions to them. Bet they don't ask other salespeople to do that for them, but they seem perfectly fine with asking us.

Jim -- even folks who have bought and sold are still in the dark about our commission structures.

Tessa -- our commissions are in jeopardy when companies like Redfin rebate commissions. I've met a few capable agents, but there are others who aren't gracious or knowledgeable.

Dec 07, 2012 01:35 AM #11
Rainmaker
1,560,031
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Darn, I missed this when you first published.  It's a good one, and many people don't understand how this works.  Even agents will say "the seller pays my commission" when they are representing the buyer.  Pet peeve of mine because the seller does not "pay" . . . it's a broker co-op fee split through the listing brokerage who is offering up a percentage of their overall commission to the selling (buyer's) agent.

Dec 07, 2012 04:43 AM #12
Rainmaker
710,558
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Carla --- I actually prefer saying that the buyer doesn't pay me. We are actually at the mercy of the listing agent's agreement with the seller. I've been in a situaiton where the listing agent's commission was more than mine because that's how he listed it.

Dec 07, 2012 07:12 AM #13
Rainmaker
65,593
Donna Bacher
PureRealty Brokerage - Hamilton, ON
Broker

Pacita...very good post...and it is always concerning! Our profession is always getting trashed...lol...and lots of times it's from within! That's the worse part...when Agents don't even know what they have to charge a certain percentage of commission!!

Jan 03, 2013 12:41 AM #14
Rainmaker
132,894
Mike Baltierra
Rise Realty - Eastvale, CA
Full Service at Your Service Realtor-Eastvale CA

That's the cost of working with professionals. We as Realtor have invested time, energy and money to become a real estate professional. We are running a business and it takes every part of the commission, that is what's left over to keep it going. Great article and I love that graphic you picked.

May 17, 2014 11:09 AM #15
Rainmaker
195,274
Antonio & Alexia Cardenas
Alameda County - San Leandro, CA. - San Leandro, CA
"The Realtors In Motion"

One of the best ways to deal with this situation with the seller is to explain at the time of the listing, how the split happens, right from the the get go. That is the perfect time to educate the first party. Thank you Pacita for bring this subject to light.

 

Antonio

Jul 20, 2014 03:08 AM #16
Rainmaker
3,052,041
Tony and Suzanne Marriott, Associate Brokers
Haven Express @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

and how would they know the amount of the total commission - just an assumption on their part?

Nov 12, 2015 04:08 AM #17
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Rainmaker
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Pacita Dimacali

Alameda/Contra Costa Counties CA
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