When a house or condo is sold, there are usually two real estate agents involved. The seller has his own agent, the buyer has her own agent. Usually, there is a commission, based on the sales price of the home. Most of the time, the commission, in the 5-6% range, is split, 50-50, between the two agents. While the seller is responsible for paying the commission, at closing, it is really the buyer who’s paying, of course.

There are other ways to pay a real estate agent, however.

One way that is becoming more popular is paying your agent a “flat-fee”. A flat-fee is just what it sounds like. Instead of paying a percentage of the sales price to an agent, a buyer, for example, pays a flat fee. Some buyers pay on an hourly basis, while others pay an up-front retainer, then a pre-determined amount, if and when they close on a property.

Why does it make sense for a real estate agent to be paid a flat fee?

Real estate professionals have traditionally been paid contingent on an outcome, even though, like [a] doctor and CPA, they cannot control it - the economic climate is what will determine how fast and for how much a home sells for.

Yet, agents are paid as though they can control the outcome and that “insurance policy” of only paying if successful is what makes this method of compensation so expensive.

Next time you’re looking to buy or sell a home, discuss flat-fee representation with your real estate agent. It might work out well, for both of you.

More: How Does Fee-For-Service Work? - The Talking Massachusetts Real Estate blog

John Keith     October 4, 2006     real estate agents

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