A couple weeks ago in the Q & A section of Active Rain, someone said a friend of hers was going to be listing her home. She wondered if it would be okay to ask her to reduce her commission to 3%. She did not realize that her agent would not get the whole commission. In my office we are still amazed by the number of customers who think that the commission they see on their closing statements goes to the agents alone. I sure wish it did! I would not be driving a 5 year old Honda Civic, living in a 700 square foot house, and sweating the health insurance premiums every month.
In most cases, the commission is split many ways. There are often many brokers and agents involved in any sale. The listing broker, the listing agent, the selling broker, the selling agent, along with any referring agents if they are a part of the transaction, get a piece of the pie. Depending on the size of the total commission, this frequently leaves very little for each participant. Each company sets its own commissions that it charges customers and then determines what part of the commission that it will offer to cooperating brokers and agents to encourage them to help sell your property. These amounts can vary greatly and can only be determined internally. Companies can not get together with other companies to set standard commissions. That would be a violation of federal anti-trust laws.I have created this flow chart to help you see how the money flows. If you click on the image it should enlarge to fill your screen. If you cannot see or scroll to see the entire chart, try "right clicking" on the image and have it open up in a new window where you can scroll. As I mentioned earlier, there are variations of the ways that commissions are split. Commissions charges also vary since companies are forbidden by law from agreeing to charge the same amounts. However, this is how splits often work, and I think it is not uncommon around Florida and the US for the commission money to flow in this manner.
My main point in this post is that no one person gets all the commission money, no matter what the plan is. In one way or another, the money gets shared with others in some way. So if you believe that your real estate agent is making a fortune handling your sale, this is very probably not the case. A good full-service agent works hard for every dollar he or she makes.
I hope that this will help clarify for my readers how commissions are commonly split. Do not hesitate to contact me if you have any questions concerning this topic. You can e-mail me at: firstname.lastname@example.org
John Elwell - REALTOR
Bill Nye Realty, Inc.
Licensed in Florida