A real estate commission is the fee that a real estate broker receives for assisting a client with
the sale or purchase of a property. In most transactions, two different brokers receive a
commission - one broker represents the seller and the other represents the buyer.
Traditionally, the seller and the seller’s broker establish the total commission amount. They also
decide how much of that commission to offer to a buyer’s broker.
No. Different brokers have different business models and can charge clients different amounts
for their services. There is no “standard” rate. Commissions are most often calculated as a
percentage of the sale price, but they can also be expressed as a flat dollar amount.
In most cases, the real estate commission is deducted from the seller’s proceeds at the time of
sale and allocated between the buyer’s broker and seller’s broker.
Not exactly. The real estate commission is included in the price that the buyer pays for the
home. So one could argue that it is actually the buyer who pays the commission, at least
indirectly.
Absolutely. In any transaction, the commission will be whatever the parties involved agree on.
Some brokers will charge more than others. Some will charge less but may offer more limited
services. And not all clients will want or need the same level of service and support.
Critics of the traditional commission model argue that it limits competition among brokers and
raises prices and transaction costs for both buyers and sellers. The buyer often has no say in
how much compensation their broker receives, regardless of the broker’s skill and experience or
the level of service that they provide. In addition, when commissions are expressed as a
percentage of the sale price, the buyer’s broker is “rewarded” with a higher commission when
the sale price of the house increases. There is no financial incentive for the buyer’s broker to
negotiate a lower sale price.
“Decoupling” of real estate commissions is a concept that has received increased attention in
recent years. When commissions are decoupled, the seller and seller’s broker no longer decide
how much commission to offer to the buyer’s broker. Instead, the buyer and buyer’s broker will
agree on a commission amount for the buyer’s broker, and the seller and seller’s broker will
agree on a commission amount for the seller’s broker.
The US Department of Justice (DOJ) believes that the traditional commission model is
fundamentally unfair and should be abolished. On February 16, 2024, the DOJ filed a brief in
the case Nosalek vs. MLSPIN et al. in which it argued that seller’s and seller’s brokers should
be prohibited from offering compensation to buyer brokers. Instead, buyers and sellers would
each be empowered to negotiate commission rates with their own brokers.
You can read the DOJ’s full brief here: https://www.justice.gov/d9/2024-02/420087.pdf
We believe that all commission arrangements with our clients should be a “win-win”. The client
must receive value from our services, and we should receive compensation that is
commensurate with the value that we deliver. We are always happy to explore different
commission options that are tailored to our client’s needs. These include traditional “percentage
of sale price” commissions, flat dollar amount commissions, and “decoupled” commissions in
which we establish a commission rate in advance for our service as either a buyer or seller’s
broker.
If you are thinking of buying or selling a home, and would like more information about our
services and different commission options, please contact our Managing Broker Shepard Long
directly at 781-690-3630 or shep@stikehomes.com.
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