Broker Compensation

The compensation that is paid to a real estate brokerage firm is a hot topic, of which is essential to discuss upfront and at length with customers who become clients. 

At or near first contact with a potential client, there are essential documents that a real estate professional is required to deliver. Examples of these include the real estate brokerage pamphlet, information about brokerage services, consumer protection notice, and buyer representation agreement. These disclosures are required to be brought to the attention of buyers and sellers alike for full transparency. 

As consumers embark on the homebuying or home selling process, who and how they pay their agent is of upmost importance for all parties to understand in advance prior to entering into an agency agreement. Buyers and sellers do have the option to negotiate compensation. It’s extremely important that costs are spelled out in advance upfront and openly in the home buying and home selling process. It’s the buyer’s agent’s duty and responsibility to explain to their client how much of their compensation will be paid through the seller’s offering, and what they will be obligated to bring in at closing.

An estimated settlement statement will be provided to both parties of a purchase and sale agreement for review prior to closing. Buyers should have a buyer’s representation agreement which outlines the parameters of their agency relationship and compensation. Services defined for homes showed, for an agreed amount of time in a geographical area. This document will spell out if the buyer is responsible for making up any difference to fully compensate their agent per the specific terms of the agreement. 

Each listing firm will have their own value proposition and percentage they charge of the sales price for their compensation. For sellers, all commissions should be clearly spelled out in advance and ideally paid out through a professional third-party escrow closing team. Compensation does vary from firm to firm based on value proposition, each consumer’s service preferences, and the competitive open market. 

It’s extremely important for consumers to understand there are different types of agents and varying commission structures offering various levels of service. Remember, agents only get paid when the home sells. Representation is key to success. For further explanation and details, call your trusted real estate professional today!