How Do Real Estate Agents' and Brokers' Commissions Work ...

Theoretically, it's simple. The real estate agent lists a house for sale, you like it, you negotiate a price with the agent, the seller accepts, the house closes, and the seller pays 6% to the broker as their fee. But in reality, it's not that simple.

There are two kinds of agents: buyers' agents and sellers' agents. In our area, buyers' agents aren't as popular as they are in other parts of the country, probably because real estate attorneys sub somewhat for the buyer's agent during the contract phase of the deal. If you see a house you like on the Web, call the agent and ask to see it, you're dealing with a sellers' agent. That agent works for the seller, not for you, the buyer.

Agents and brokers? What's the difference? Both real estate agents and brokers must be licensed. Brokers are more knowledgeable and must pass a harder exam than agents. Agents work for brokers; they are licensed to sell real estate but they can't work independently. Some brokers work directly with home buyers and sellers, and some have staffs of agents working for them. Not all brokers work for themselves; many work for real estate companies or franchises.

The standard fee a seller pays a broker is 6%. That is for a full-service brokerage. Cut-rate brokerages are also becoming better known, but are less popular in the high-cost Hamptons. However, fees may be negotiable, probably more so in smaller brokerages. Agents are more likely to accept a 5 percent commission if the seller is a repeat client or buying as well as selling. Also, higher-value properties sometimes have a lower percentage rate.

Agents generally are paid a percentage of the commission received by the brokerage from the sale, sometimes as little as 30-40 percent. Top agents receive more.

What about co-listings? If two (or more) brokers list a house, they split the commission. They may not split it evenly, however.

Buyers: as always with real estate, find out exactly whom you're dealing with, whom they're working for, and, if possible, do a little research on them. Are they an agent or a broker? Is the listing exclusive? How hungry are they for a deal? Do your research and remember: you are the one on the hook for paying hundreds of thousands if not millions of dollars for this property. No one else. Don't expect anyone else to guard your interests as closely as you do.

Sellers: choose the person who lists your house wisely. How successful are they at marketing your kind of property? How savvy and knowledgeable are you about the local real estate market? Remember, reducing one percentage point of commission can mean tens of thousands of dollars more in your pocket at the end. On the other hand, successful agents got that way because they know how to sell properties. They're professionals and you're not. Good luck. [Curbedwire]

Source: http://hamptons.curbed.com/archives/2013/03/18/how_do_real_estate_agents_and_brokers_commissions_work.php

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