Real estate commission rates vary from broker to broker and in most cases depend on real estate agent’s performance and experience. In not so distant past one of the most common commission splits was 70/30 where 70% of the commission would go to an agents and the rest to a brokerage house. This model was acceptable to agents when real estate market was at its peak where real estate agents’ income levels allowed splitting their commissions with a broker.
But market has changed and what was an acceptable compensation model just a few years ago now is becoming a thing of the past. The new models of real estate agents compensation are emerging.
All these changes are driven by the market conditions. Somehow agents have got to make a living and so do brokers. When the money is tight, Americans get inventive. Even with 100% commissions today as an agent you wouldn’t be able to make the same money you did before the realty market crash. But what you can do is to make a living and that’s seems to be what’s on everyone’s mind.
How Commissions Rates Are Being Determined
Historically, commission rates were determined by the broker and in some cases new agents were sharing 50% of their transaction commissions while expert agents and top performance were eligible for full 100% commission rates. From the first glance such unequal compensation may look unfair to agents but from the broker’s perspective various levels of splits were used as motivational factor for agents to close more sales.
100% Real Estate Commission Rate
Now not only real estate agents have a choice to work for full commission broker but also have a choice of which hundred percent commission broker can better suit their needs. Since the numbers of this new breed of brokers are growing rapidly so is the competition which leads to innovation in real estate agent support area.
Rates of Commission on Closed Transactions
In regards to real estate commission rates percentage on closed transactions the rates fluctuate between 2% and 7% depending on the type of property and set agreement. Since sharp decline of residential realty pricing while commission structure remaining at the same percentage, agents make much less money per transaction. Also, the transaction numbers have declined and to continue a productive career many agents have embraced a different approach to prospecting, lead generation and have become less reliant on a broker as a source of leads.
Negotiating Commissions With Clients
Many consumers are aware that they can negotiate commissions with their agents. Some of the most common conditions for commission negotiation where:
- A client has more than one property on the market and wants to negotiate all transactions under a single volume discount sum.
- When a property is priced low and in a favorable condition which position it for a quick sale. The longer the property stays on the market, the more work requires for an agent to bring in buyers, show property, take offers, negotiate, etc. Basically, if property sales fast there is a chance that the client is inclined to ask for a discount.
- If an agent has already a qualified buyer and transaction takes place fast, an agent makes more money and in this case clients may ask for a discount.
- A client offers a financing which makes it easier to sell the property.
- A client engages in combined marketing of his property and thus reduces the array of services of his agent.
Some of the realtors have various service packages where client can pick and choose what type of service they will require from their agent which determines the amount of commission rate. In not so distant past commission rates where 6%-7% but lately it has went down to 3%-5%. Under these conditions, clients have to realize that there is less room for negotiation.
As an agent you certainly want to keep as much as you can while providing clients with excellent service. That’s why your track record and your ability to market your self is very important when it comes to keeping your commissions intact. Most of your clients wouldn’t mind paying your full commission if they see the value of your service.
Certainly full commission rate (100%) in this case is a desired factor, even you have to negotiate your commissions with the client you still have more money left at the end.