Splitting commission is important if you want to make a name for your real estate business. When a business does not offer fair commission, word gets around fast and it can be hard to find people willing to work with you. There are but a few rules to assure that you are splitting your commission properly. If you follow them, you will make a good name for yourself within your community and within the field. Plus, you will make a profit.
Who Gets Paid and How?
Many are not sure who gets paid when it comes to selling investment property. Fortunately, the answer is quite simple. The buyer’s agent takes a portion of the commission, while the listing agent takes none. That is because the listing agent is paid up front, while the buyer’s agent is not. For everyone to receive what they should expect to earn from the sale, you will give the commission percentage to the buyer’s agent. The listing agent does not expect a commission after you pay them to make the listing.
Incentives
Commission is what drives agents to encourage home-buyers to put more down on a property that they are purchasing. A buyer’s agent will see a cut (oftentimes twenty percent) of the down-payment, so they ask buyers to pay more if possible. While they incentivize the buyer, you incentivize them with the commission. The more that the buyer puts into a down-payment, the more the buyer’s agent receives in return. This reward system assures that agents are paid based on their performance.
How Better Agents Earn You More Money
While the buyer’s agent is working to make more commission, they also make you more money if they manage to net a larger down-payment. When a buyer’s agent is able to encourage the property buyer to spend more, you do have to release more commission, but you also see more profit.
Once a buyer’s agent knows more about how much money the buyer has, they are more likely to extract a larger sum for the down-payment. A good agent will encourage the buyer to spend as much as they have rather than remaining conservative.
The symbiotic relationship between you and the agent that you’re working with is important. If they believe in the property and work hard to get a larger down-payment, both of you will receive more money in the end.
Working with your listing agent and the buyer’s agent is pertinent to assure that you make the most that you can. While listing agents will not take a commission, the buyer’s agent will, and they will be working for both you and themselves. Encourage them and you both will end up with more profit.
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