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Commission
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Commission

The fee charged by an agent or broker for representing a buyer or seller’s interest. A commission is generally a percentage of the sales price.

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When taking out a loan for making a purchase, such as a home loan or a car loan, it is typical to pay commission to the agent who helps you with the purchase.  This commission is usually a percentage of the sales price.

The cost of a car purchased from a dealership includes a commission for the salesperson.  Unfortunately, this is usually not negotiable.  The dealership factors in the commission when setting the price for the car.  The salesperson is motivated to sell the car for as close to the list price as possible in order to get the full commission.

In a real estate transaction, the commission is usually split equally between the buying agent and the selling agent. The national average tends to be 5 to 6 percent of the sales price, but that is not a rule.  It can vary greatly depending on the area of the country or the individual agent.  Also, say the house sells for $200,000.  6 percent of that amount is $12,000.  However, that does not necessarily mean each realtor gets $6,000.  The agent has to pay a portion of the commission to his/her brokerage. That amount depends on the brokerage and also which real estate companies are involved.  If both agents are from the same company, the brokerage tends to let them keep more of the commission.

The commission in a home purchase is negotiable.  There are even ways to avoid it altogether.  If you choose to sell a house by owner, then you do not have to pay commission to a listing agent, although if a buyer uses an agent you are expected to pay a commission to that agent. 

Before entering into a contract with a real estate agent, discuss the commission.  See if s/he is willing to take less than 5 or 6 percent.  Realize that the other agent involved may not be willing to take less for his/her commission.  So, if your listing agent agrees to a 4 percent commission, the buying agent may still insist on the more standard 3 percent cut for him/herself.  That means that your agent is going to take much less.  Make sure that the quality of your service is still satisfactory at this commission.

Be eager to negotiate and be willing to pay when it comes to a commission.  It is a part of the cost of your transaction.  Skimping on the commission may mean less service, but there are also opportunities to negotiate less commission and still get great service

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