How Your Real Estate Agent’s Commission Works


Excerpts from Make No Mistakes About Buying Real Estate, 3rd Editon.

So how does the buyer’s real estate agent get paid? Most often, it’s by the seller. When the sellers contract with their listing agent
,[1]they agree on a commission, generally about 6% of the sales price. That commission is often split between the two agents – the listing agent, and the selling agent, who is also known as the buyer’s agent.[2]

When one agent agrees to represent both sides, there is an exception to this standard practice. Such an agent is often described as an intermediary.[3]

In most cases, the seller pays the commissions from the equity, or appreciation, the home accrued; the equity is easily accessible when the home sells.

After splitting the 6% commission, the two agents then have to split their 3% commissions with their brokers; that is, with the owner of the agency each agent represents. Some of these fees can be as high as 50%, depending on the brokerage. Your real estate agent may also be entitled to other compensation, known as a “Bonus to the Selling Agent,” or BTSA, from the seller. Remember, your agent is referred to as the buyer’s agent or the selling agent, so don’t get confused as to which agent receives the BTSA. Sellers and their agents use this bonus as an incentive for garnering the support of the buyer’s agent. A seller hopes the buyer’s agent will use his or her influence to sway the buyer toward that particular seller’s property. Don’t hesitate to ask your agent if there is a BTSA offered for the sale of a property you’re considering. In fact, you should ask, because you need to know what is motivating your agent – hopefully, it is your best interests! Unfortunately, we’ve seen agents search for properties with these bonuses, and then try to influence their clients to purchase those properties.

 



[1]The listing agent is the licensed representative who sells the house on behalf of the seller.

[2]The selling agent is also described as the agent who represents the buyer.

[3]An intermediary is an agent who is employed to handle both sides, selling and buying, of the transaction.


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