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In today's blog we will go over something that not many home buyers think they need to know when looking to purchase a home: real estate commission. The commission paid to the seller and buyer broker is typically paid by the seller, who takes a percentage of the selling price and splits it between the two.
It may seem a bit irrelevant to know the commission that is paid to agents, but the more a home buyer knows the more aware one can be about the state of the real estate market and other pertinent information.
Like we stated earlier, the commission paid to seller and buyer's agents is usually paid by the seller. There isn't a set rule when it comes to the actual percentage of the selling price that is going to be paid to the agents, but the general rule is usually around 5-7%. In the past, this percentage would be split 50/50 between both agents, but this has been changing in recent years. Nowadays a seller's agent may keep a larger percentage than 50% and give the remainder to the buyer's agent.
The commission that a property owner promises agents can give a home buyer a good idea of the current state of the real estate market. For example, if the commission for an area is lower than average then the area is probably a seller's market meaning that there are more buyers than sellers. If the commission is higher than the average then it means that sellers are trying to persuade buyer's agents to bring clients to their properties and there are more sellers than buyers. This is called a buyer's market.
The commission paid to agents during the home buying process isn't something that many home buyers know much about because it deals more with a seller of a property. Nevertheless it is important to be familiar with how commission is decided and split so you as a home buyer can have a broad understanding of the home buying process as a whole.
Work Cited: Glink, Ilyce R. Questions Every First-Time Home Buyer Should Ask. New York: Three Rivers Press, 2005.
NEXT BLOG: Be sure to check back with us for the next blog topic: "What is a discount broker and should I use one?"
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