What are the different types of Commissions and how are they applied?

In General Area - Asked by Ray K. - Sep 22, 2008
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James C.
Birmingham, AL

There are not many different types of commissions, but sometimes commissions will be paid out differently. Example: a broker sells a property for an owner and in the listing agreement the owner says he’s going to pay the broker a commission. That commission, typically expressed as a % of the sale price, will be paid to the broker upon close of escrow (finalized sale). It was the owner who paid the commission on the sale. But the buyer might use the same exact broker as the owner did when buying the property. So in this case, the broker “double ends the deal,” meaning that that broker is paid a commission by the seller of the property AND the buyer of the property. If you ask a broker if he wants to “double end the deal,” 100 out of 100 times the broker will say “damn right I do.” But unfortunately, it doesn’t always work that way. If the buyer has his/her own broker, the buyer will owe a commission to his/her broker and the seller will owe a commission to her/his broker, and everyone walks away with a piece of the deal. It’s hard to say what happens more frequently in the real world, but suffice it to say that double ending the deal is seen as a bonus to any broker. Higher value properties almost always have a listing broker (commissioned by the seller), and a buy-side broker (commissioned by the buyer). Lease deals can work more or less the same way, though (and you’ll notice this behavior reflected on the space entry page on LoopNet) lease brokers are typically far more willing to share their commission with a “cooperating” broker (cooperating just means that there are two brokers (buyer and seller, or landlord and tenant brokers in the deal).

Sep 22, 2008
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