In real estate, commission is the amount paid to the broker in exchange for their services rendered. This fee is charged on top of your overall due to be paid upon purchase of any property. Most real estate brokerage firms earn their profit through the commission they get in every transaction. There is no government-imposed standard charge for commissions, hence the amount varies in every broker and location.
Different Types of Commission
Commissions come in different types too.
Fixed Commission – The rate in this type of commission is agreed upon before any sale, where the broker gets a specific amount stated on the arrangement. The advantage of this is that the amount paid is set regardless if the sale price goes up or down.
Tiered Percentage – This setup is favourable to both the seller and the broker. The commission they get is directly proportional to the sale price of the property. An initial rate is set for the base price, and another percentage is added to the total due amount when they are able to sell it for a higher price.
Are Commissions Negotiable?
Real estate commissions are negotiable regardless of location. One thing to remember is that this is a mandatory payable fee. Only properties sold directly are not liable for commissions.