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Christine Baker
BayHouse.com

 

 

 Real Estate Commissions

The majority of residential properties in the San Francisco Bay Area are listed with a 6% commission. In most cases the Seller will want the property included in the MLS and the Listing Broker usually offers 1/2 of the commission to the selling office (the Broker representing the Buyer.)

The individual Agents receive a split based on their employment contracts with their Brokers. In California, Agents cannot be paid directly unless they hold a Broker license.

Generally, new Agents receive about 50% of the Broker's commission. Experienced "top producers" often are on an 80/20 split and with some companies such as RE/MAX, Agents receive up to 100% of the commission. Obviously, the Agents then pay monthly desk fees to the Broker and are responsible for all expenses.

It is important to understand that rarely one Agent receives the full commission. On a $200,000 sale with a 6% commission, a Selling Broker and a 50/50 Agent split, the Agent receives only $3,000 of the total $12,000 fee.

Commissions are negotiable at the time the property is listed, and sometimes the listing contract calls for only 4% or 5% if the Listing Broker also sells the property and the commission is not split with other Brokers.

I discourage dual agency because I have yet to figure out how to negotiate with myself.

Essentially, both the Buyer and the Seller lose representation and the Agent is the winner with a much higher commission. It's obvious that the Agent will try very hard to close that deal and will NOT act in the interest of the Buyer and/or Seller.

It happened to me several times that Agents ignored my VM messages asking for a meeting to present an offer, because they were working with a prospective Buyer themselves and did not want to have other Buyers competing and reducing their commission. It is illegal, but almost impossible to prove.

It is a standard Real Estate practice to pay referral fees.

I've seen postings in real estate lists offering up to 40% of the gross commission at close of escrow. I have never seen a Broker refusing to pay a referral fee PRIOR to having an accepted offer. Getting referral fees out of a broker AFTER having an accepted contract is like squeezing blood out of a turnip.

This is also how the referral and relocation services work. Usually the Broker pays a fee to be on the list of referral Brokers. That's all it is.

The Buyer needs to be aware of the commission for each property for several reasons:

  1. According to the Buyer Broker Agreements utilized by many real estate Brokers, the Buyer is responsible for a certain percentage to be paid to the Broker. If the commission offered in the MLS is less, the Buyer would have to pay the difference.

  2. While I can't speak for other Brokers, I have always had a provision in my Buyer Broker agreements to refund to the Buyer any commissions over 3%.

    Sometimes desperate Sellers pay commissions of up to 5% to the Buyer's Broker or bonuses of several thousand dollars. My Buyers liked that. Of course the Seller also puts the Buyer on notice that he either wants/needs to sell quickly or the property is overpriced.

  3. The extra $$$ are offered to the Buyer's Agent because many Agents will recommend those properties to their Buyers and pocket the extra commission themselves.

Be sure to discuss bonuses and commissions with your Agent. Only written agreements are enforceable!

 

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