How Do Real Estate Commissions Work?

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Hey everyone, today I am going to answer a question I got recently from a client. They were trying to sell their home with the help of an agent, but they were confused about how commissions work in the real estate business, and what kind of commission a good agent charges. Today I am going to answer that question.

There are a variety of ways that this question can be answered. Since the answer varies by market, I will break it down for you.

Here in Minneapolis, most agents work strictly off of a percentage, while others work on a flat fee or retainer, based on their marketing expenses.
 
Most agents are going to work with the primary portion of their payment based on the commission percentages of sales prices. So  whatever the sale price is, a percentage of that will go to the agent. This percentage can range anywhere from 4-10%, based on the agent's experience and track record. The better the agent, the higher the percentage they will likely take.

Personally, I work off of a commission of 6 or 7%. So if I'm getting paid 7%, typically half (3.5%) will go to the buying side and the other 3.5% will go to the listing agent. Within that percentage, the agent will potentially pay for marketing, brokerage costs, labor, payroll issues, taxes, running their business, and profiting from running that organization.

If you have any questions on how commissions work, I'd love to give you the details. Just give me a call or send me a quick email.