In most areas there is a customary percentage that real estate agents expect to earn as a commission. When completing the listing agreement, you and your agent will negotiate and agree on the amount of the real estate commission.
When you agree to a commission with a listing agent, you should keep in mind that there are usually two agents involved in most transactions. Most of the time, only part of the commission goes to the listing agent. The other portion goes to the agent representing the buyer.
Some commission-related questions you could ask:
Will my property be listed in the Multiple Listing Service®?
Being listed in the MLS® expands your sales force. Every agent is invited to bring potential buyers to your property. This larger supply of buyers gives you selling power.
What is the effect on the company representing the buyer?
Since part of the commission usually goes to the company representing the buyer, you may want to ask whether that portion of the commission offers the customary amount. As mentioned above, the more agents that show your property, the more selling power you have.
What is the effect on marketing?
Very few properties are sold through advertising or open houses, but it does happen. Most often, those ads generate calls from potential buyers or sellers, who end up as clients for real estate agents -- and you want agents to bring potential buyers to your property. Advertising your property to other agents has a higher impact than direct advertising to consumers.
Will you be tied-in to other services?
Some real estate companies bundled services offered by other companies (such as home cleaning service, carpet cleaning, home staging, appraiser, and mortgage brokerage) and collect a referral fee when you use any of these services. You should know if the agent listing your property is earning a fee from any other source. Be sure to ask questions and determine whether you are limited to certain choices or you have the freedom to also explore the open market.
How and When Listing Commissions are Earned
Your agent's job is to find a "ready", "willing" and "able" buyer for your property.
The commission is earned when:
A purchase agreement is agreed to by all parties, it becomes an unconditional purchase agreement, and a sale is completed. Then the agent has done his job and earned the commission. Once the sale has closed, the real estate brokerage gets paid from the proceeds of the sale.
The buyer or the seller backs out of an unconditional purchase agreement, the agent has done his job and earned a commission. If a buyer backs out of an unconditional purchase contract the forfeited deposits are shared between the seller and his agent - the listing agreement states how the deposits are shared.
A seller does not accept an unconditional offer that meets the price and terms of the listing agreement, the listing agent has still earned the commission.
The commission is NOT earned when:
The buyer proves unable or unwilling to remove the buyer's conditions as stated in the purchase contract. The house is placed back on the market and the agent has to begin earning his or her commission all over again.
The listing expires and the property is not sold.