February 4, 2018
How is a real estate commission fee calculated? Unless you have negotiated the commission fee that you will pay your Agent, you can assume that in most parts of the U.S. that you will be paying 6% of the final negotiated Selling Price of your Home.
In every state that I am familiar with, and certainly in California, the Listing Agreement is between the Seller and the Broker who will list the Property for sale on the local MLS. Your “Agent” is typically an independent contractor working for the Broker, under an agreement that establishes how much of the commission the Agent will receive when the Sale Closes. This can range from 50% to as high as 95% for very high producing Agents, but for simplicity sake lets’ say the Agent gets 70%. The amount of the commission that will be paid to the Buyer’s Broker (and will be posted in the listing for your property on the MLS as “CSO” or Commission to Selling Office) will also be in your Listing Contract and you should pay close attention to that figure as well.
So here’s the math: If your home sells for say $400,000, the total commission you, as the Seller, will pay will be $24,000 (again, unless you have negotiated a more competitive rate). Of that $24,000, $12,000 will be paid thru Escrow to the Listing Broker (the Agent is actually paid by their Broker after closing, and this is where the Agent’s split comes into play and any other charges the Broker may make upon the Agent). $12,000 will be paid in Escrow to the Buyer’s Agent’s Broker, the “Selling Broker”, who will pay the Buyer’s Agent their split outside of Escrow.
So, at the end of the day, out of a total commission of $24,000, typically you’ll see the Listing Broker get $3,600, the Listing Agent (the one you know and have worked with) will get $8,400, the Selling Broker will get $3,600 and the Selling Agent will get $8,400.
Mark Wilson is a licensed California Real Estate Broker and is the Co-Founder of ListingBidder.com.