The way a commission works is this (mostly):
Seller decides to sell his or her property. He or she interviews a couple agents, decides on one. The commission due on sale is usually in the 5% range (in Massachusetts). This commission is split (usually) 50-50 between the listing (or “selling”) agent and an agent that finds a buyer.
I should be clear, though. The commission is actually split 50-50 between the BROKERAGES that the agents work for.
From the 50% that each side gets, the agencies take their cuts – maybe 50% of each 50%, maybe less, depending on the agreement between agency and agent. (At Coldwell Banker, the company takes 35-50% and the agent takes between 50-65%, for example.)
So of a $25,000 commission, $12,500 goes to one side, $12,500 to the other. From that, each agent gets 50-60% (companies such as Keller Williams and Raveis take much less, although the agents are responsible for a lot more of their expenses).
(Agents who work for me get 100% of their commission – I take $1,000 on every sale up to $500,000, $1,500 up to $1,000,000, and $2,500 over $1,000,000. That’s just about the best split in the business!)
I entered the industry too late to enjoy 6% or 7% commissions. Unfortunately, right?
The typical commission paid right now is 5%; the rate has dropped to 4% in parts of Dorchester, but that’s the only place I know of in the city.
You can negotiate the rate. Sure, try. And, if you don’t like what your agent says, find another agent. I wouldn’t get too caught up in it, though. If you don’t like the idea of paying a commission at all, do a FSBO.
My take? Pay the same commission rate as every other seller. Yes, I realize you’ll think I’m saying that because I want commissions to stay high. But, that’s not what I said, did I? I said you should pay what everyone else is paying. You want to encourage buyers (and their agents) to visit your property. If you make your property look “different”, you’re lessening the chance of making a good sale.
More: Selling a House? Commissions Are Now More Negotiable – By Aleksandra Todorova, The Wall Street Journal