It is common knowledge that a real estate agent will charge you a commission whenever he carries out any real estate transaction. Moreover this commission varies according to the type of real estate and geographical area. The following article tries to explain the role of an agent or broker, his commission and closing costs.
Any person who has been authorized by his or her client to act as an agent in the sale or purchase of land is a realtor. It can be a person, group of persons, firm or a company. In United States the licensed real estate brokers are authorized to make real estate sales and purchases. The Department of Real Estate or the Department of Licensing of the State government provides the realtor with licensing or authorization to sell. In some cases, the Real Estate Commission (regulatory body) also provides authorization. The people who hold valid license are known as real estate brokers.
On the other hand a person who does not hold a license but works under a licensed broker is known as a salesman or a real estate agent. Commission earned by the either varies from case to case and also from state to state. Though the real estate commission rates vary as per states, the average commission charged by realtors is about 6% of the deal, with several commission dropping down to 5.2% or some prices rising to 6.5%, in really costly deals.
Real Estate Agent and Broker
As mentioned above, the real estate market in United States is accessible through licensed brokers , who are empowered to either sell or either officially inquire for purchase. The real estate brokers have a team of agents working as their employees. These agents are largely classified into listing agents and selling agents.
The listing agents do the job of finding a real estate through the Multiple Listing Service as per the specifications of their clients. The selling agents as the name suggests, do the job of finding potential customers for the real estate. Now when a property is sold, both the listing and selling agents become involved in the deal. The commission split, in a majority cases, is a straight 50:50 split. However, in some cases one agent many end up getting more or less, as per the circumstances.
The commission is though paid to the broker, a part of comes down to the agent along with the conventional real estate agent salary. This kind of mechanism is seen in almost all real estate deals. In some cases, the agent receives the commission and then a small portion is forwarded to the brokerage firm.
Real Estate Agent Commission
The standard commission is often affected as a result of several factors such as the selling price or the buying price of the property. The commission in several cases, is also affected by the time span within which the real estate was sold. The commission in such circumstances is in the form of cash. However the norms of Real Estate Settlement Procedures Act are applicable to the act, meaning that the agent cannot give off any favors or deal in kickbacks. The customer or client is protected by the Department of Housing and Urban Development.
Some commission rates, as of 2010, have been listed below:
- Delaware: about 5.7%
- Idaho: about 5.1%
- Hawaii: about 5.5%
- California: about 5.2%
- New Hampshire: 5%
- Tennessee: 5.6%
- Wyoming: about 5%
- Alabama: 5.3%
This commission is subject to change and it must be also noted that there are several agents or broker firms who provide certain legal documents and registration, transfer, assessment and appraisal services, for which they charge extra.
The problem is commission on real estate marketing is not mandated by any certain body, it is just ascertained by convention. Most of the agents and broker firms disclose all closing costs and charges to their clients, hence you can take multiple opinions while signing the attorney documents or any contractual document.