I remember when I was ready to buy my first house, I didn’t think I could afford to use a Realtor. A friend of mine finally talked me into calling her Realtor and even though I agreed to have him help me find a house, I still didn’t really understand how he got paid. Fortunately, the sellers of the house I was purchasing were offering to pay my Realtor’s commission fees, so I didn’t have to pay my Realtor anything out of my pocket.
Realtors generally get paid a commission for the service they provide their clients, but there is a big misconception that Realtors take home huge commission checks. There’s a lot of hands in the cookie jar, so I want to clear up how Realtors actually get paid.
In Indiana, all commissions are paid to the Brokerage Firm who hold the Realtors license. So in my case, Century 21 Scheetz is the Brokerage Firm who holds my license. When I sell a house, the title company writes out the commission check to Century 21 Scheetz, not me.
So after the Brokerage Firm receives the commission check from the title company, it will withhold the operating fees it charges its Realtors and then pay the Realtor her final commission. Operating fees are sometimes called desk fees or splits, but the fees cover the firm’s cost to do business, like building rent, administration and management expense, or marketing expenses.
You can see there is a lot dividing and sharing of the commission. If a home is listed for $350,000, you can expect the total commission of that home to be somewhere between $17,500 and $24,500 (depending on your negotiated commissions), operating fees will be withheld and then the Realtors will receive their share of the commission.
Looking back on the first house I bought, I got lucky, because the sellers paid my Realtor commission and I am forever grateful. I may not have been able to buy my first house without the sellers financial contribution. Another time before I became a Realtor, I tried to sell my house with a DIY brokerage. I thought that because I was in marketing, I could easily sell the house myself as long as I got it on the MLS. Boy was I wrong! When I finally gave up and decided to use a Realtor, we got it sold in a matter of days. We didn’t change the price, the photos, the staging or the listing service. What sold that house was the power of the Realtor network. Worth it’s weight in gold!
Real estate transactions are complex and there are many ways to get from point A to point Z. Whether you are buying or selling, it is in your best interest to have an experienced Realtor on your side who has specialized market knowledge and can provide you fiduciary advise and guidance for your biggest personal asset.
My true love is selling houses, after all I was a marketing executive for more than 25 years. I love marketing houses, but I am also happy to help buyers find their next home. If you’re ready to buy or sell a house, let’s talk!
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