Commission Types.
1. Traditional Standard Commission
Traditionally this method is the norm in the real estate industry and the agent’s commission is calculated on the overall sale price of the property. The commission most agents will ask for is traditionally between 1.75% to 3.75% of the overall sale price and this fee varies depending on the property value, location, method of sale, agent and agency you select.
2. Flat fee
Some agents advertise a flat fee rather than a commission based on a percentage of the sale price. The benefit of this model is it provides certainty around the price you’ll pay to sell your house. You’ll know ahead of time exactly the amount you’ll be paying your agent, regardless of the sale price.
Of course the drawback is that a flat fee might not motivate your agent to get the best price possible for your property.
3. Tiered commission
A tiered commission structure is one where an agent receives a certain percentage of the sale price up to a predetermined dollar amount, and a higher percentage for anything over this amount.
In other words, for a property valued at $570,000 to $590,000 you might negotiate to pay your agent 2.0% for any sale price up to $600,000, and then 10% for anything over $600,000.
For example
Scenario 1: Using the above tiered commission structure, the property sells for $580,000. Therefore commission payable on the $580,000 sale price is 2% = $11,600. This sale price is within the estimated price range. Many sales are conducted in this manner.
Scenario 2: The same property sells for $610,000. The agent receives $12,000 commission (2% of the 1st $600,000), plus a bonus of $1,000 (calculated as 10% of the sale price over $600,000). The bonus for the agent is $1,400, however for the seller the bonus is $28,600.
This structure has the potential to motivate your agent to secure a higher price for your property rather than a traditional commission structure and is bonus system for the seller and the agent.
Traditionally this method is the norm in the real estate industry and the agent’s commission is calculated on the overall sale price of the property. The commission most agents will ask for is traditionally between 1.75% to 3.75% of the overall sale price and this fee varies depending on the property value, location, method of sale, agent and agency you select.
2. Flat fee
Some agents advertise a flat fee rather than a commission based on a percentage of the sale price. The benefit of this model is it provides certainty around the price you’ll pay to sell your house. You’ll know ahead of time exactly the amount you’ll be paying your agent, regardless of the sale price.
Of course the drawback is that a flat fee might not motivate your agent to get the best price possible for your property.
3. Tiered commission
A tiered commission structure is one where an agent receives a certain percentage of the sale price up to a predetermined dollar amount, and a higher percentage for anything over this amount.
In other words, for a property valued at $570,000 to $590,000 you might negotiate to pay your agent 2.0% for any sale price up to $600,000, and then 10% for anything over $600,000.
For example
Scenario 1: Using the above tiered commission structure, the property sells for $580,000. Therefore commission payable on the $580,000 sale price is 2% = $11,600. This sale price is within the estimated price range. Many sales are conducted in this manner.
Scenario 2: The same property sells for $610,000. The agent receives $12,000 commission (2% of the 1st $600,000), plus a bonus of $1,000 (calculated as 10% of the sale price over $600,000). The bonus for the agent is $1,400, however for the seller the bonus is $28,600.
This structure has the potential to motivate your agent to secure a higher price for your property rather than a traditional commission structure and is bonus system for the seller and the agent.