This is up there on the list of questions I’m asked when I go on a listing appointment. In general, talking about real estate commissions can be a tenuous subject. The subject of real estate commissions can be fraught with concerns about price fixing or anti-trust. Generally acceptable rates can vary depending on State, County and even Town. Real Estate Brokerage offices may provide guidelines on what they want their Real Estate Agents to request for commissions. By New Hampshire Real Estate commission law, Real Estate Agents are able to negotiate their own commission rates. However, it should be noted that Real Estate Agents can’t take receipt of a commission directly from a Seller only the Brokerage firm for the Real Estate Agent can receive the commission.
When looking at the Seacoast of NH and Southern Maine, I’ve seen/heard of real estate commissions for listings being as little as 3% and as high as 10% and more. Typically, when there is a commission involving 10% or more it’s because the list price/property value is on the low side. I’m talking in the $50,000 and/or less category. The 10% may seem like an exorbitant amount but look at it from the agent’s perspective….
Take for instance, a mobile home is coming on the market for $20,000. Let’s assume the listing agent and sellers agree on a commission rate of 10% inclusive of an offering to any real estate agent who locates a buyer for this mobile home. If the listing agent ends up selling it without the assistance of a cooperating real estate agent then this could translate into $2,000 to the Real Estate Brokerage firm. (Remember real estate agents can’t take direct receipt of the commission.) If it’s a traditional office where the Brokerage firm takes 50% of whatever the Real Estate takes in for a commission than it is likely that the real estate agent will receive $1000 of the $2000 commission.
Taking a step back, if it turns out the listing agent ends up selling the mobile home with the assistance of a cooperating real estate agent then not only will the cooperating real estate agent be paid from the $2000 commission but the listing agent’s brokerage firm as well. The numbers could look something like….
$20,000 sales price X 10% commission rate = $2000 in commission dollars.
If there is a listing agent and a buyer’s agent involved in the sale and the listing agent evenly splits the commission with the buyer’s agent then…
$2000 divided by 2 = $1000 in commission dollars for each real estate agent.
Then the listing agent submits the $1000 into their real estate brokerage firm (which is a traditional firm) who takes 50% of whatever that agent makes…
$1000 commission divided by 2 = $500 in commission dollars to the listing agent and $500 to the real estate brokerage firm.
If you apply this same type of thinking to a $1,000,000 listing than the numbers might go like:
$1,000,000 sales price X 10% commission rate = $100,000 in commission dollars.
If the listing agent sells the property themselves and there is no discount to the seller on the commission then $100,000 would go to the brokerage firm to be split between the real estate brokerage form and the real estate agent. Assuming it’s a traditional office:
$100,000 commission X 50% for the Brokerage Firm = $50,000 for the brokerage firm leaving $50,000 for the listing agent.
When thinking of a $1,000,000 listing these numbers do seem exorbitant which is why you’ll hear of the higher priced homes offering a smaller rate of commission. The seemingly smaller rate of commission will translate into a higher commission dollar to the listing agent and the real estate brokerage firm.
Since real estate commissions are negotiable there can be a variation in the commission rate. It can very slightly from one brokerage firm to the next and one agent to the next. Newer agents may have less ability to negotiate their commission depending on their financial responsibilities to their office while high volume agents may have more flexibility.
You may want to consider reading… Benefits of Working with a High Volume Real Estate Agent