The Head of Business Development at 4 Stories, the Marketing and Consulting Division for New Developments at LG Fairmont, Leah Azizian discusses about how “commission” is a word that gets thrown around A LOT in the real estate field…
Whether it’s by:
– Starting agents who don’t fully understand how much commission/money they will make
– Clients who like to use our commission as a negotiating tool/tactic toward a price they should accept
– Seasoned agents who like to “advertise” their earnings
Therefore, Leah figured that it’s about time that we break down how much money real estate agents actually make – not out of “spite”, but to provide some more clarity around this term.
So let’s say we’re looking at a property that is $800,000. The average commission in New York City is about 5% to 6% of the purchase price. Six percent of $800,000 is $48,000 gross commission.
- A majority of your deals will be co-broked. The first thing to keep in mind is that 90% of the time, you are co-broking your deals with another brokerage.
- 50% of the gross commission will be split amongst 2 brokerages.
- So the $48,000 will get split down the middle amongst both sides.
- That leaves your brokerage with $24,000 (that is how much your brokerage takes).
- 50% of the gross commission will be split amongst 2 brokerages.
- There is another split within your brokerage based on what you negotiate with them.
- So take 50% — 50% of $24,000 which will leave you $12,000 (your net commission).
- You will be splitting your net commission accordingly with whoever you partner with.
- Could be your colleagues
- Your partner/colleague will be deducting marketing expenses. This goes for:
- Photography
- Videography
- Listing platform expenses
- You will also have your taxes to keep in mind.
Don’t get caught up with all the glamour and glitz that you see. Your net commission is usually about a quarter (1/4) or 1/3 of the gross commission.
Leah has also cleared up misunderstandings from clients who made comments or had questions below. Hopefully some of these questions answer yours!
- People always tend to grab big numbers by guessing…
- Leah: Always… the gross numbers by us tend to get marketed frequently, leading to lots of misunderstandings. Time we clear things up!
- Great post! A vendor/supplier should never have to break down their numbers for their clients. If the client doesn’t trust you, then he’s not a right fit for you. Of course there are always basic negotiations guidelines, but to get down to your actual numbers? Never!
- Leah: Agreed, precise/actual numbers should never be disclosed. This post was meant more on the conceptual side, for people to see that there’s more beyond the gross numbers. It is easy to calculate a 5-6% commission. But in reality, that’s not what we take home…
- On behalf of all realtors, thank you Leah! It’s imperative that the public understands the commission structure, perhaps it will bring more clarity and perception to light.
- Leah: Agreed, there are plenty of more conversations to be made…
If you have any questions for Leah regarding New Developments, learning more about the real estate field, or even working in the real estate field, please reach out to her via LinkedIn or lazizian@lgfairmont.com!
LG Fairmont is hiring a Licensed Real Estate Salesperson and if you have an entrepreneurial mindset, then you may be the ideal candidate. Don’t miss out on this great opportunity!
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