The Vig: What’s The Commission? Who Pays It? And, How Much Is My Agent Getting Paid?

The Vig: What’s The Commission? Who Pays It? And, How Much Is My Agent Getting Paid?

  • Claudine O'Rourke
  • 05/23/19

I believe there should always be full transparency when it comes to money. I’m of the Suze Orman faith; we should all talk about what we make and how much we spend. I’m not funny about money. As a matter of fact, I believe this hush-hush attitude about money matters is what perpetuates the problem that I’m about to bitch about.

Let's get something straight: broker commissions are not yours to take. We deserve to get paid. We deserve our full commission without a seller, buyer, or attorney sticking their filthy hands in our cookie jar. This is what we do for a living. We don’t get a salary. Our commission is our livelihood. The commission is not something to be leveraged to give a client more value. The commission is not there to bridge the gap on price, pay for closings costs, transfer taxes, or broken appliances. The commission is our compensation for our services and quite frankly, none of your business. Many of you have dipped your hand in our pot and let me be clear you suck.

Would you run onto the trading floor of your stockbroker and demand a point off the commission he just made to be kicked back to you? What about a piece of your hairdresser’s hourly wage or previous tip? What about a few thousand dollars from your local teacher or firefighter? Would you expect any of them to work for free? If you’re thinking that’s ridiculous, good. So how about, I won’t charge you to answer your gazillion questions while I’m on vacation and you don’t try to cut into my commission when I negotiate the best bargain in real estate for you. deal? (Read my article Do’s and Don’ts. Spoiler: #1 Rule: Don’t be a Dick.).

I’m actually more than happy to disclose what I make and how I make it. In NYC real estate, it’s quite simple. At the time that a seller signs a contract to list their property with a brokerage firm, the commission is set it’s in the listing agreement. The standard commission in NYC is 6% of the sales price. This 6% is the total commission. It’s paid for by the seller. (Did you catch that, buyers? The total commission is paid by the seller. This is why working with a buyer's agent is free to you! It’s also why you can’t expect your broker to bridge the gap. The commission is not at all yours to take.) The seller sets the commission at the time the exclusive agreement is signed and it’s paid in full to the listing broker’s firm. The listing broker’s firm then splits that commission with the buyer’s broker’s firm. In other words, the two firms get 3% each.

Also important to note, in NYC something like 98% of all deals is co-brokered. So, it’s important to have a healthy commission to encourage and embrace the brokerage community to bring their buyers! (See my article Secrets to Listing for Sale if you want a discount in commission.). As a member of REBNY / The Real Estate Board of New York, we are obligated to split commissions 50/50 with the co-brokering agency. That means 3% or half of the total commission goes to the real estate firm (not directly to the agent) that brings the buyer.

From there, most firms split their gross commissions 50/50 with their agents. This can vary of course, but that is the standard rule of thumb. So the agent’s vigorish is typically 1.5% of the sales price.

1.5% of the sales price is the agent’s gross commission. We incur many expenses and do not have taxes withheld. This means we pay a higher tax percentage at the end of the year because our income is taxed like bonus income. Now, I play many roles on tv, but a CPA is not one of them. Having said that, given a paycheck of $15,000 on a $1M sale, I better set aside $7,000 of that commission for taxes, just to be safe.

Let’s also remember how long we work with a client and on a deal to eventually get our 50% of 50% minus expenses and taxes. I work with clients for 3-6 months searching and showing property. At the time they make an offer to the closing table, that’s another 3-4 months. On average, I work with clients for 9 months or more! My point is, I work hard for the money da dat, da dat so hard for it hon-nay!

Now listen, I’m a girl of reason. I often give concessions for various reasons. If you’re a repeat client, a family member, close friend, or if I felt like kicking in was the right thing to do to make all parties happy, then I’ve done it. But that’s at my discretion. If you’re buying a $2M second home, don’t ask me to chip in to pay your taxes. Remember my #1 rule.

Work With Claudine

Want a no B--S-- agent who knows her stuff and is nice?? Yah, nice. I love my job and I calculate debt to income ratios in my sleep! Nobody knows a co-op better than me. If you want someone shrewd who uses her kindness as a weapon, then I’m your girl.

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