The housing market is booming right now, and many aspiring individuals are looking to make the real estate industry their future professional home. There’s a lot of homework that needs to be completed before you can rush into the life of a successful real estate agent, however, including making sense of the dizzying world of real estate commissions.
Understanding the ins and outs of real estate commissions is your first step towards gaining a comprehensive understanding of the real estate industry as a whole. These are the key facts behind real estate commissions that you need to know.
The ins and outs of commission
In a nutshell, any real estate commission can be defined as the sum of money the seller of a real estate property gleams off the top of the total sales price to dedicate to listers, real estate agents, and other professionals involved in the sales process. Typically, real estate agents can derive sizable portions of their overall salaries from commissions they get from selling properties. Traditionally, commissions have been used as a sort of incentive to motivate real estate agents to angle for better prices and more frequent sales.
The intricacies behind some real estate commissions aren’t always easy to understand, however. Often times, for instance, many people are unfamiliar with the amount of people involved in a real estate commission; a sizable commission could end up getting split up amongst a large group of real estate professionals. Seldom is one large commission given solely to any one individual.
Commission has changed over time; once, a norm of 6 percent was widely established across the country. Recent reporting makes it clear that real estate commissions as we know them are rapidly changing, however; newfound technological advancements that have disrupted the real estate industry have even resulted in the elimination of real estate commissions in many cases.
More often than not, agents aren’t paid a commission if they fail to close the deal, which is a huge incentive for real estate professionals to sell properties. Technically, the money that comes from a commission, like commission advance, originates in the wallet of the buyer, but it’s ultimately the seller of the property who gets the commission fee. Sometimes, real estate firms act as middlemen, collecting some commissions from sales and distributing them amongst agents depending on the specifics of the deal.
If you’re having trouble negotiating a real estate commission, remember that the age-old standard of 6 percent isn’t as common as it used to be. Sensible real estate commissions reflect the effort put in by the real estate professionals who closed the deal. While real estate commissions will continue to evolve as technology advancements change the way we buy, sell, and showcase properties, it’s fair to say that commissions will endure in some form or another for the foreseeable future. They act as a valuable incentive to close deals, after all, and real estate commissions remain a very important source of income for many hardworking real estate professionals.
