Q: I am confused as to why a Realtor is entitled to profit on a payout or loss in the sale of a home. I understand they are entitled to commission on the sale price of home, but why on a payout amount? The actual sale price is the full amount of sale minus the closing costs. My home is an estate and for inheritance we will deduct the cost of the closing as an expense, that is legal. So how is it legal and ethical for the agent to charge commission on that price.
?Gem3850, Munhall, PA
A: The sales commission is typically based on the actual sales price. You had a choice when the offer was presented as to whether or not you would pay for various inspections, escrow/title costs, repairs, and buyer closing cost credits. Buyer closing cost credits help the buyer recoup lender fees, buyer?s portion of escrow/title costs, inspections and home warranty paid by the buyer, appraisal and credit verification fees, etc.
Your listing agreement with the Realtor will identify if the commission is based on the actual sales price or if it is based on a net sales price (rare but possible). Realtors do not earn commissions based on the net amount received by the Seller, as that would vary greatly, depending upon how much the Seller owed on the home. The commission paid to the Realtor is one of the selling expenses, just as are the escrow/title fees, inspections, buyer closing cost credits, etc.
Debra Kroon is a Realtor? with Yosemite West Real Estate in Yosemite, CA.
A: I am a California agent, not Pennsylvania, however, I am willing to share my experience and knowledge as a Realtor.
When you sell your home, you may negotiate any commission you like. It?s up to you and your agent to come to agreement about what commission will be paid to your Realtor.
Typically, Realtors make 6% commission based on the TOTAL SALE PRICE.
So, for example, if you agree to pay $5000 of the buyer?s closing costs and sell your house to them for $300,000, your agent would make commission on the full $300,000. Your ?expenses? (like credits to the buyer) come out of your pocket only and are usually write offs for your taxes that year.
Conversely, if you agree to pay for $5000 of the buyer?s closing costs and increase the sale price to $305,000, then your Realtor makes commission on the full $305,000.
In summary, you can include verbiage that states any buyer credits given by seller will reduce the base amount calculated for agent commissions, or something like that. Just so you know, for one client in the past, I even donated $1000 of MY commission and got the other agent to do the same thing to put toward the buyer?s closing costs. You can negotiate almost any scenario.
I hope this is helpful for future transactions.
Denise Shur is a Realtor? with 1:1 Realty in San Jose, CA.
A: It is legal and ethical if that is what it said in the listing agreement you signed. I?ve never even seen one that based the commission on the net to the seller. Sometimes, Realtors will waive the commission on a portion of the sales price that is given back to the buyer as a closing cost concession. That only makes sense for the listing agent though. If the buyer?s agent was able to negotiate closing cost concessions for the buyer then it makes sense that THEY get paid based on the full sales price. An argument can even be made that the buyer?s agent should get MORE ? not less ? if the sales price is lowered ? since that is what the buyer hired them for.
Paul Howard is a Realtor? in Cherry Hill, NJ.
A: Commission is charged on the ?Sales Price? of the property, not the net to the seller.
Joan Flood is a Realtor? with Dagmer Chew HomeStead Real Estate Co in Cape May, NJ.
A: Usually the listing agreement defines the commission based on the full purchase price not the net. If you want commissions based differently that needs to be agreed at the time of the listing agreement. I wouldn?t think it is an ethics issue because the agreement spells out the arrangement between the seller and the broker.
Since it is never known what the final agreement between buyer and seller will be or what concessions a seller is willing to take it would be hard to define what price other than purchase price to base commission on. I could see a situation created for disagreement, and uncertainty.
Yes usually your closing cost including commissions paid are considered an expense of the sale. I cannot address legal questions you would need to consult an attorney.
Whether there is a profit or loss to seller, the agents still performed their duties and most likely put in many hours of work to get the property sold.
Teri Andrews Murch is a Realtor? with Lyon Real Estate in Auburn, CA.
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