Recently, I placed a home on the market for a 65 year old single man who is about to retire. I have known him for over 20 years but only represented him once in a real estate transaction. He was the buyer so the home seller paid the real estate commission in that transaction. However, he has bought and sold many properties over the years.
I checked on the sales prices in his neighborhood and determined that his market value is $150000. The commission on his proceeds sheet showed 6% (standard in Nevada) or $9000. The money in his pocket after paying off the mortgage and costs of the sale would be $10000 at close of escrow.
The seller said to me, “You are making as much as I am and it is in your best interests if I price my house this low so you get paid quick. I want $180000 for my house.” (Overpricing a house is another topic for a later date!)
I was surprised that the Vegas home seller thought that I was going to get ALL THAT COMMISSION!!! For the general public not to know how the commission is split is a sad state. No wonder they think real estate agents are dramatically overpaid!!
Here is an example of how a $9000 commission could possibly be split up:
1/2 to Listing Broker office= $4500 (The other half goes to the agent representing the buyer and is split in a similar fashion)
Agent for the broker received it as a referral from out of state with a 30% referral fee due off the top= $1350 (Total commission is now $3150)
There is a company franchise fee (Prudential, Century 21, etc.) and a charge for errors and omissions insurance= $250 (Commission is now $2900)
Agent is on a 70% split with the broker (could be 50%). Commission is now $2030.
Out of that commission, the agent will possibly pay the following:
1. Sign installation and take down
2. Colored flyers
3. Mail-outs to the area showing the house is on the market
4. Car gas and maintenance to and from the house showing it, presenting offers, putting flyers in the box, etc. (You would be surprised at the number of buyers that have told me what a nice car Prudential provides for me- they really believe I get a company car!!)
5. Cell phone usage to take sign and ad calls
6. Website maintenance and placement of ads on different sites
7. Marketing to other agents in the area
In addition to fees for a single property, agents pay Board of Realtors dues, MLS fees, lockboxes and lockbox key rental, county and state business licenses, continuing education classes (required), company fees, etc.
It is important for the public to know what a listing agent does 7 days a week and 24 hours a day on call for service. Make no mistake- it is a good paying job for hard workers but not to the extent that the general public perceives!