Commission: 4 Questions No-one Wants to Ask

It’s no secret that Realtors are paid in the form of a commission.  We are not paid on an hourly basis but paid on the closing of a successful sale.  The first step in developing a healthy and honest relationship with your Realtor should be transparency when asking questions. Especially those regarding commissions. Here are some great questions to ask your Realtor to help break the ice.  Also remember that every Realtor and scenario are different, so although these are common situations and fees that are paid by me, it may differ for every situation. 

1. What commission rate do you charge? 

Most Realtors act as “independent contractors” for their respective Brokerages and have their own commissions rates. But personally, I charge a 5% commission rate. This is charged to a seller when selling a home and covers 2.5% to the agent representing the buyer and 2.5% to me as the agent representing the seller. This means that you can view the home with your own agent and they will be paid by the seller on closing.  

2. What expenses are allocated under this commission? 

When working for a Seller typical expenses that I take on are: staging, professional cleaning, photography, videography, drone footage, Facebook and Instagram advertising, showings, offer presentation and negotiation. I take on all of these expenses up front without any pay from the seller, but with a signed Listing Agreement. 

It is important to remember that we as Realtors run a business and also incur other expenses such as: 

a) Commission splits 

This is a portion of our commission that we must give to our Brokerage. 

b) Desk fees 

A desk fee is a monthly fee for having a physical office within the Brokerage. 

c) Taxes 

As a Realtor, taxes are not automatically deducted from our income.  We must set that money aside to pay taxes yearly or quarterly. 

d) Gas and vehicle expenses

As a Realtor, we spend the majority of our day in our vehicles showing houses and always need to have a functioning vehicle and gas in the tank to be available to do our job.  

e) Printing and office supplies 

As a business, we are responsible for supplying our own ink for printing, pens, paper, mailing supplies, etc. 

f) Marketing material 

Things like signage, business cards, websites, folders and billboards are all great examples of marketing expenses that Realtors can incur that are all paid out of pocket.

g) Board and insurance fees 

Realtors in Sudbury pay a monthly fee to be a member of the Sudbury Real Estate Board (you must be a part of a real estate board in order to maintain a license). We also pay yearly insurance fees. 

3. As a buyer am I required to pay a commission? 

If you are purchasing a property that is listed with a Realtor, you do not have to pay a commission (as long as the commission in the listing is the same as the commission that you’ve agreed your Realtor will receive on the Buyer Representation agreement). The seller and the Listing Agent have already signed an agreement that allots your agent an amount for representing you as the buyer. So no, a large portion of the time you will not have to pay commission as the buyer, although there are some exceptions to this rule. 

4. If I want to purchase a house that is privately listed, am I required to pay commission? 

Often times, the Seller is more than willing to pay for the commission of a Buyer’s agent as a part of the sale of their home. But in the event that the Seller is not willing to pay a commission to your Realtor, you would be responsible for paying your Realtor’s commission if you have signed a Buyer Representation Agreement.