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Brokers Commissions And The Mysterious 6%

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Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a home or apartment, with leading experts lending their two cents. Additional questions welcomed to Today: Brokers and their commissions, with commentary by Vanessa Grout, President of Douglas Elliman Florida.

Question: How much do real estate brokers get paid?

Short Answer: Brokers get a 6% cut.

Long Answer: Everything is negotiable, but the rule of thumb is 6%, meaning you can often (usually?) negotiate less. There are various reasons why a commission would be slightly lower or higher based on the difficulty of the sale, the market, etc. This money is divided, usually 50/50 between the buyer's and seller's broker, and if there's only one broker involved, then it all goes to them. What if you sell your house to your aunt, and no broker is involved? If this happens during the period of the contract (usually 90-180 days) the broker gets the commission anyway, because, well, you signed a contract and they did a bunch of work anyways, like marketing the house and listing it on the MLS.

Although 6% can add up to a lot of money, especially for big ticket sales, it's usually divided up multiple times. A quick note on terminology: a broker is a company (a.k.a. a "brokerage"), and an agent is the person in the company tasked with selling your house. Each party's agent gets some of the money, while those agents' brokerages get the rest. Then the cost of marketing your house still has to be deducted. In the end, each agent involved usually gets significantly less than that grand sounding 6%, but they still make way more than journalists like us. And that's basically it. And unlike most things, there aren't any weird Floridian twists to that basic system (that we know of, and we looked).

Vanessa Grout, President of Douglas Elliman Florida, tells us a little more about the ins-and-outs of broker commissions:

The regulation of Real Estate Brokers is maintained at the state level, meaning Florida covers Florida, New York covers New York, etc. But all over the U.S., real estate commissions are completely negotiable between the listing broker and the seller. These two parties can agree on any amount whatsoever, paid as a flat fee or one based on a percentage of the sale. The standard transaction fee charged to the seller by the seller's agent is 6% of the purchase price. Typically, this commission is paid evenly upon closing to the listing or seller's agent and to the buyer's agent. Commissions may be increased or decreased by the listing broker, as warranted. For example, if the listing broker deems that the property will be difficult to sell, the brokerage may charge a higher commission. If the seller anticipates the requirement to accept less than a desired value, the commission may be reduced. Note that any commission reduction must be agreed upon before the buyer's agent submits an offer and listing brokers are responsible for communicating the amount of the commission due to the buyer's agent on the MLS. Okay, so pretty straightforward stuff. For more on the benefits of a broker, or why you might want to do it alone (and save that 6%) see our post house hunting.
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