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Commissions
explained
Traditionally the commission is paid for by the seller from the
equity of the house. And for the seller this always seems like a
such a burden. It is rarely understood how the commissions paid
are "trickled" down to each party, including Uncle Sam. The
commissions paid are split four ways. What ever the commission
is that the seller and broker agree on, is then split between
that seller’s agent and the agent that brings in the buyer.
And it
doesn’t stop there. Then, each agent (unless a licensed and
independent broker themselves) splits their gross commission in
half with their broker.
Then,
Depending on whom the agent works for, if it is a national
franchise, there are franchise fees that are automatically
deducted from their commission prior to the close of escrow.
Some go as high as 8%
To
better understand this, let’s use an example. A house sold for
$200,00 and commissions paid were at 6%. The gross commissions
to be split would be $12,000.00. Each side (buyer’s agent and
seller’s agent) gets half. So lets work with just the seller’s
agent to keep it easier. Let’s say the seller’s agent is at a
70% split with their broker. So the agent is left with $4200.00
gross commissions. Then, if they work for a major company, their
franchise fees could be as high as 8%. 8% of $4200 is $480.
Minus that from their gross commissions are they’re left with
$3800. Their net commissions is $3800, but it doesn’t stop
there. Then they have to deduct what costs were invested to
market the home (advertising, brochures etc.), these costs come
from the agents pocket. And last but not least, being an
"Independent Contractor" the agent must deduct about 30% of
their gross commissions (in this case 30% of $2760 equals
$1260.00) to set aside and pay taxes. Let’s say that
marketing cost them at least $500.00, So what is the
average agent left with? a whomping $1,960for about 90 days of
work.
Total commission was $12,000
Split 50/50 between Listing Office & Selling office= $6000 each
Split 70/30 between agent and broker= $4200 agent
Take out 8% for franchise fees=$480
Take out 30% for taxes=$1260
Plus take out $500 on average for marketing expenses.
Total left for the agent $1,960.00
That's a big difference from 12,000.00 dollars
If you have any questions, Please call
1-866-OC-House
© 2010 OC Home Finder Team.com - All rights reserved.
Written By Shan Roberts
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