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Curbed U: How Do Brokers' Commissions Work Anyway?

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Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a house or apartment. Additional questions welcomed to la@curbed.com.

When you decide to buy or sell your first house, there's a whole bunch of stuff you're suddenly supposed to be an expert in--hence this little Curbed University series. But in addition to the internet, your real estate agent should also be there to guide you through the ins and outs of mortgages, setting a price, making an offer, negotiating tactics, inspections, and everything else. So how does your agent get paid? Well first, a note on terminology: many people use the terms interchangeably, but a broker and an agent aren't the same thing. In the simplest terms, a broker is the company that employs individual agents (a Realtor is a member of the National Association of Realtors trade group).

When someone decides to sell their house and lists it with a broker, they sign a contract giving the broker the exclusive right to list the house for a set period of time (often 90 or 180 days), and agree on a percentage of the sale price the broker will receive as a commission. This commission, which is usually in the 5 to 6 percent range, is then split between the buyer's and seller's brokers. And if you sell your house to your cousin during the listing period and the agent played no role in the sale? They still get the commission. The broker then pays the agent based on their own contractual terms. In some cases the agents will get a percentage of the commission, with the broker keeping the rest. In other cases--generally when the agent is more experienced--the agent could get the full commission, but pays the brokerage a set fee. [Illustration by Eric Lebofsky]
· Curbed University [Curbed LA]