The largest and most misunderstood cost in selling a home is the commission paid to the listing real estate broker and agent. The most common misconception is that this commission is 100% profit to the real estate agent that is representing the home seller. Often the seller is never told how this commission works to get their home sold.

The most important use of the commission funds is to find a buyer by offering all the other real estate brokers and agents an incentive to have their buyers look at your home, submit a purchase offer, and handle the buyer's portion of the paper work.

An agent has many expenses related to selling homes, such as, advertising, auto, office, forms, copying, postage, communication equipment, referral fees, multiple listing costs, association costs, insurance, taxes, social security, etc. Typically your listing agent receives about 1/4 of the commission to cover all expenses & compensation and the agent that produced the buyer receives the same amount.

Typical Example:  A home is sold for $100,000 with a 6% real estate commission.

• The $6000 real estate commission is split between the listing broker and the buyer's broker.

• The $3000 received by the buyer's broker is split between the buyer broker and the buyer's agent.

• The $3000 received by the listing broker is split between the listing broker and the seller's agent.

• The $1500 received by the broker is used to cover all expenses involved in running a business enterprise and to compensate the employees supporting the business.

• The $1500 received by the agent is used to cover all their expenses and compensation for the time spent in selling the home and handling the transaction.

In summary, your agent is likely to make less than $1000 in the above example or less than 1% in the sale of your home.