REAL ESTATE TRANSACTION LICENSEES
Before we get into a discussion about fees, we should probably identify and define the roles of the licensed players and the hierarchy of the brokerage which are:
- Brokerage
- Broker
- Agents
BROKERAGE (Brokerage Company)
“the real estate business, whether a sole proprietorship, a legal entity, or any other licensed person engaged in acts requiring a real estate license in Idaho, that is conducting or holding itself out as conducting the business of real estate through a designated broker.”
BROKER (Designated Broker)
“the individual who is licensed as a real estate broker in Idaho and who is designated by the brokerage company to be responsible for the supervision of the brokerage company and the activities of any associated licensees.”
AGENT (Salesperson)
“means any person who has qualified and is licensed as a real estate salesperson in Idaho under this chapter and is licensed under, associated with, and represents a designated broker in the performance of any act described in subsection (39) of this section.”
Source: Idaho Statutes: Title 54 – Professions, Vocations, and Businesses; Chapter 20 – Idaho Real Estate License Law
REAL ESTATE FEES 101
In order to bring some clarity to common misconceptions about real estate fees, we will focus on three areas:
- The Fees Themselves
- Representation Agreements
- Fees Distribution
WHO DETERMINES REAL ESTATE FEES?
Real Estate Brokerages establish Office Policies for the real estate fees their agents must charge. However, Agents may have some flexibility in that policy to discount fees for friends, family, or past clients. But those one-off discounts are typically subject to the broker’s approval.
For example, the Office Policy may say something like, “Total Brokerage Fee shall not be less than 5%. The portion shared with the cooperating broker shall be no less than 2.5%.” Therefore, it may be a good idea to ask to see the Brokerage Office Policy on Fees when you are interviewing Agents. You may discover there is room to negotiate on the rate.
Note: There is no “market standard” for real estate fees. Suggesting there is could be a violation of federal anti-trust legislation. Within the Brokerage, while there may be a standard rate based on office policies, there is no standard rate across brokerages or within the market.
WHO OWNS THE REAL ESTATE AGREEMENT? – AGENT? OR BROKER?
The Brokerage, not the Agent, owns all written agreements with Buyer or Seller clients and customers. This includes Seller Representation Agreements, Buyer Representation Agreements, Compensation Agreements, Limited-Service Agreements and more. Agents act on behalf of their Broker. Therefore, any written agreements are between the Client and the Brokerage, not the Client and the Agent.
For example, you are working with an Agent and you list your home with the Agent’s brokerage. Then, the Agent changes brokerages during the term of the agreement and you want to continue working with the Agent. In this case, the Agent can’t just move your listing to their new brokerage. It’s up to the Broker the listing agreement is with to release the agreement to the other brokerage.
NOTE: Read agreements carefully and consult an attorney if you have any questions or concerns BEFORE SIGNING and/or BEFORE TERMINATING any agreements before the expiration date.
HOW AGENTS GET PAID
The real estate transaction has officially closed once all the parties to the transaction have signed, the funds are received by the title company, and the deeds are recorded with the County Recorder.
At that point, title disburses the proceeds. The Seller’s mortgage, HOA’s, and other lienholders are paid, checks are sent to the respective brokerages to pay real estate commissions, and the seller receives the balance (net proceeds). Commission checks are written to the Brokerage – not the Agent.
Once the transaction file at the brokerage is accurate and complete, based on payment schedules, the brokerage pays the agent. Brokerage fees are retained from the gross commissions and the agent gets their “split.” There are as many brokerage “split” agreements as there are brokerages so there is no reason to get bogged down in that. But suffice it to say, the agent rarely gets 100% of the gross commission and may give up as much as 20% or more to the brokerage.
CONCLUSION
Suffice it to say that the real estate industry is vibrant and as a result attracts new and retains experienced agents and brokers. As a consumer, you have a number of choices about the professional real estate services available to you. From the Agent you choose to work with directly, the brokerage that offers the services and results you expect, AND the fees you are willing to pay for these services. Shop around to find the best combination of experience, skill, service, results, and fees. The old adage of “You get what you pay for,” no longer applies. We hope that when all is considered, you will give V Squared Realty an opportunity to compete for your business.
V Squared Realty – SAVE THOUSANDS. SACRIFICE NOTHING.
- Complete Comprehensive Listings Services
- Experience – 17 years Full-Time Realtor/Broker
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To discuss your specific real estate need, please contact us today. The market anxiously awaits your home.
