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Have you ever wondered what your real estate commission covers?

How is it allocated?

Do you assume, like many, that all the agent’s costs are covered by his Broker and that the agent pays nothing, therefore he/she is readily prepared to offer you a lower commission?

What would you think, if after the end of a long hard week at your job, your boss came to you and rather than pay you your normal wages, wanted to negotiate your pay that week? What if he asked you to accept a pay cut of 1-2% that week,  even though you had performed your job well, or exceeded his expectations?

Real Estate agents are independent contractors, and, as such are responsible for all expenses related to performing their job as a real estate agent, in addition to the common expenses we all incur like you, such as paying our mortgage every month, buying groceries, paying utility bills, paying car/house insurance, medical insurance, etc.

Most Sellers I encounter are not familiar with how the Selling Commission is allocated, and what it actually covers.  Here is an excerpt from my booklet… A Real Estate Guide for Sellers

How Commission Is Allocated … and What It Covers

Real Estate professionals are independent business people who must pay fees to their broker, to their boards, and must cover ALL of their business expenses before they acquire net earnings.

Most professionals receive an hourly fee for services as the work is done, but real estate agents are paid ONLY when have successfully completed a transaction.  All work leading up to that point, which might include consulting, fee appraisal evaluations, listing, marketing, showing properties, pre-qualifying Buyers, setting up appointments, advertising, prospecting, etc. remains unpaid, until two parties are successfully brought together in a real estate transaction

How Is It Allocated?

The commission paid to the Listing Broker upon completion of the sale is allocated as follows:

  • 50% is paid to the selling broker, of which the salesperson gets a portion, dependent on what level of ” split” they are on at a given time.  Each agent is under contract and the split, varies with the amount of commission earned
  • 50% is paid to the listing broker, out of which the salesperson who represented the Seller get his/her portion.  The amount will be dependent on what “split” they are currently on with their respective broker.  Again, this amount varies with the amount of commission earned.

What Does Commission Pay For?

Real Estate Sales people are considered to be self employed contractors, working under the umbrella of their brokerage.  As independent contractors we are responsible to pay a variety of fees and expenses. Here is a sample of some of things we have to pay for out of the commission we earn….

  1. Licence Fees      The Ontario Real Estate Association decrees that a realtor must licenced to sell real estate under their jurisdiction and by-laws.
  2. Board Fees:        Toronto Real Estate Board, and Mississauga Real Estate Board and any other Real Estate Board the agent is a  member of.
  3. Broker Fees:       We are under contract to our broker for holding our licence and being the broker under whom I can trade in real estate, therefore a portion of the commission earned goes to the brokerage.
  4. Franachise Fees:  Many brokerages are francises, and as such, we are required to pay a monthly franchise fee.
  5. Advertising:        All advertising, which includes newspapers, flyers, newsletters, mail-outs, web sites, feature sheets, personalized booklets, etc. are all expenses the  real estate agent is responsible for.
  6. Office Fees:         A fee is paid to the broker to whom we under contract for use of such items as:  office space, computer equipment, software, fax machines,  photocopiers, phones, pagers, stationery, secretarial services, listing sign, open house signs, business cards, and automobile.
  7. Education Courses:  Agents are responsible for all educational courses and real estate seminars. Continuing education courses are mandatory and we must earn a specified number of credits over a 2 year period in order ot retain our licence.
  8. Insurance:        Because we are independent business professionals, we are  responsible for our own medical/dental insurance and personal liability  insurance.

As you can see, all these deductions/expenses are taken from the total commission real estate agents earn which is paid to the brokerage, and we are left with the balance.

Most real estate agents work diligently to get your house sold for the highest dollar amount possible, with as little stress as possible to you and in the quickest time possible.  More than 80% of people who try selling their own home, soon realize how much work in terms of time, and money that is truly involved, and soon entrust the sale of their home to a real estate agent. Selling your home is more than putting a “For Sale” sign on the lawn or posting it on your local Real Estate Board.  The clauses in an Agreement of Purchase and Sale can be confusing if you are not trained to read them properly, and one word could change the meaning of the entire clause and be detrimental to you, which could cost you thousands of dollars you were not anticipating. Your agent is there to protect you and look after your best interests when negotiating the sale of your home.

Leave it in the hands of a professional.  This sale of your home is probably one of the most expensive monetary transactions you will make.  Any errors made if you choose to handle it yourself, could be devastating.

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I live and work in STREETSVILLE and have a vested interest in property values here. Are you considering buying or selling or know anyone who is? Give me a call for a complimentary evaluation of your home in this changing market. (416) 717-6331.

When you choose me to handle your real estate needs, you are choosing a real estate professional who cares about you and your family, and who will listen to your needs, work together with you, and protecting your intersts to achieve your objectives.

www.gloriavalvasori.com      gvalvasori@rogers.com

Your STREETSVILLE Real Estate Agent

Experience, Service and Integrity in Every Real Estate Transaction

I am the proud recipient of the Quality Service Certified Platinum award for outstanding serivce to my clients – a rating of 100%

Helping You Make The Right Move since 1987. Call me at (905) 363-4622 or direct at (416) 717-6331.

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