A real estate commission is a fee paid to a real estate agent, broker or realtor after a real estate transaction is complete. Real estate agents essentially work for free until they are paid this commission. Selling agents will host open houses and show interested buyers around the home, while buying agents will take their client to view the different homes that the buyer is interested in. Both agents will then work together to negotiate the final sale. The commission is their compensation for all their up-front work.
The seller of the property involved in the transaction usually pays the real estate commission. Real estate commission percentages can be tricky because commissions may vary greatly from office to office and region to region. The broker of any given real estate agency may set the commission fees at 5%, 6% or even 7% of the selling price to list any given property. If a participating agency sells the house, the listing agency may split the commission or the listing agency may take more.
By using the Multiple Listing Service (MLS), real estate agents can find out about commissions by taking a look at the BAC and SAC fields. The BAC field is designated as the "Buyer Agency Commission" and the SAC field is designated as the "Seller Agency Commission." If an agency charges an even 6% commission to sell any given property, it may spilt the commission fee with a participating agency. If this were the case, the fields would read "BAC 03" and "SAC 03." This means that the seller will pay a 3% commission to the selling agency. The other 3% will go to the listing agency.
Find out about your local real estate commission laws; click here to visit the Directory of U.S. and Canadian Real Estate Licensing Offices to locate your local office and learn more about how real estate commissions work in your area.
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