Most Sellers I encounter have no idea of how the Selling Commission is allocated, and what it actually covers. Here is an excerpt from my booklet... A Real Estate Guide for Sellers .... where I try and educate them for a better understanding
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, 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 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.
4. 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.
5. 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.
6. 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 oer a 2 year period in order ot retain our licence.
7. Insurance: Because we are independent business professionals, we are responsible for our own medical/dental insurance and personal liability insurance.
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