Jayasty Anandan

Real Estate Commission Florida: Everything You Need To Know Florida is one of the hottest markets in the nation. The state’s economy is dynamic and diverse, with dozens of global business headquarters. And as more and more people move to Florida for high-wage jobs, the state has become even more attractive to buyers. Buyers can buy a home in this state at a relatively affordable price. The median price for a single-family home in Florida is much lower than in other populous states. That’s why so many people, approximately 30% of the U.S. population (as per the latest NAR report), are buying homes in Florida. If you are a seller in Florida, then kudos! You can make handsome money selling your home. With so many people buying homes in Florida, the chances of a quick sale for your house are very high. However, if you have landed here, we are sure that commission to brokers and agents is one of your key concerns out of the many things on your plate. Don’t worry. We will solve this for you and explain everything about Florida’s real estate commission. 1. How much commission do real estate agents make in Florida? Although the average commission has remained around 6% for many years, the real estate agents' annual income fluctuates yearly depending on market conditions. According to the U.S. Bureau of Labor Statistics, realtors' national average yearly income was $51,200 as of 2020. However, as of October 2021, the national average income for real estate agents has increased to $82,898, as suggested by ZipRecruiter's current employment trend data. As their commission-based income depends on various factors, their wages vary. These factors can be the years of experience and the hours they work per week. A realtor's location also plays an essential role in determining their yearly commission. Due to market conditions and competition, real estate average pay differs from state to state. As of October 2021, Florida's average annual real estate salary is $67,145. 1.1 How much do real estate agents charge for buying or selling? The average real estate commission in Florida ranges between 5-6%. As per recent reports, this percentage is somewhere around 5.4%. Considering the average price of a home in Florida to be $218 307(as per NAR), the average real estate commission in the state can amount to $11,788. As of July 2021, the median price for a single-family home in Florida was $355,000, so considering a 5.4% commission percentage, you can predict realtors getting a good $19170 commission on a successful home sale. That is a lot of money, and you must think that a realtor earns a lot. Well, that is not exactly the case. A realtor’s commission is not always his and his alone. Let us explain. Suppose your home sells for $300,000, and the commission value on the listing agreement is 5%; the agent should ideally earn a whopping $15,000 on closing the deal. However, he doesn’t, as he has to share this commission with the buyer agent. As over 95% of buyers (As per NAR) hire a real estate agent to buy a house, this split is almost inevitable for the listing agent. The split would be in the ratio mentioned on the listing (this split in 99% of cases is 50/50). Now if we come back to our example, for a $300,000 home, both the agents will earn $7500 each. However, that is not the only cut the agents must take. If the agent works for a brokerage, which in most cases they do, they must pay the brokerage a commission for helping them land a job. Some brokerages charge their agents a flat fee per sale or a flat monthly fee, and most charge a commission that can easily range between 30-60% of what the agent makes on a sale. This means from this $7,500; the agent has to pay a certain sum (here, let’s say 30%, which is $2,250) to the brokerage. Your agent is then left with a few thousand dollars, $5,250 if we continue the above example. Now you must be thinking even that is a big amount to pay just for advice and expertise, well you make a fair point, but you are not entirely right. When listing a home, the agent also spends a good chunk of money marketing your home- via flyers, ads, or listing on the MLS. All this cost them money. Say this amounts to $1000; the total money earned from a real estate transaction (which takes 5-7 weeks) is $4,250. 1.2 How much do realtors charge for rentals? Many real estate agents offer their renting services to tenants looking for a place to rent. These services include ● ● ● ● ● ● Advising renters of the current market rates in their preferred areas Researching and locating relevant properties available for rent Scheduling and attending inspections with landowners Assisting with rental applications Evaluating the credit score for occupants Negotiating and establishing lease terms and agreements with landowners The realtor's commission for renters will depend on the time involved and the number of the above services offered along with the pricing structure, and location. Do note that there is no standard fee that realtors charge for rentals. 1.3 Florida Real Estate Commission Example: Let's use an example to understand the real estate commission concept. If you sell a home for $300,000, and the commission rate is 6%, this means that $18,000 is going to real estate agents and brokers. If the seller and buyer agents split the commission, both parties get $9,000. Now depending on the split decided beforehand between the agent and the brokerage, this amount will be further divided between the two parties (the agent and brokerage). If this split is 50/50, the commission payoff would be as follows: Seller agent’s broker (50%): $4,500 Seller agent (50%): $4,500 Buyer agent’s broker (50%): $4,500 Buyer’s agent (50%): $4,500 2. Who pays Real Estate Agents' commissions in Florida? Typically, the seller is responsible for covering the commission fee, which is split among the seller agent, buyer's agent, seller agent's brokerage, and buyer agent's brokerage. Thus, the seller is essentially paying for everyone involved in the transaction. But if you see this from a broader perspective, you will understand that the commission is actually baked into the price of the home. In that sense, the seller does not pay any money from his pocket. In fact, if there weren't any agents involved, the home price would be relatively lower. Even if sellers list their house as FSBO, they still need to pay the buyer's agent a commission. This commission percentage can be around 2-5%, depending on what they promised when listing the property. Over 95% of buyers today have an agent to represent them, so this cost is inevitable, even if you wish to save on the agent's commission. Who determines the real estate commission percentage in Florida? The agreement between the seller and the listing agent determines the commission. Most real estate agents charge their clients based on their experience level and the market in which they operate. The commission is entirely negotiable, and as per NAR, it generally falls around 5-6% of the property's sale price. Why are commission rates so high? There are several reasons why real estate agent commissions are so high. Firstly, several parties split the commission, which means that no single agent gets 100% commission of what they get from the seller. Secondly, real estate agents cover the marketing costs of selling the property. This can be expensive, mainly if the house stays on the market for a long. Lastly, there are several other expenses that real estate agents bear when working to sell a property. These include hiring a professional photographer, home staging, etc. The agents bear all these costs. That’s why the commissions are generally pegged at this rate. Can I negotiate a real estate commission in Florida? Commissions are always negotiable. If a 5-6% commission looks expensive, you can negotiate as a seller when you have a move-in-ready property. However, if you are a buyer, you cannot negotiate the commission since you aren’t the party that will ultimately pay this amount. Also, remember that if you pay a low commission to your agent, your agent will not be fully motivated to get your house off the market. They may also do less advertising of your property since their marketing dollars also come from the commission. There are many reasons why real estate agents may accept a lower commission: ● If it is easy to sell a property in a buyer's market ● You are selling an upscale property ● If your agent is providing fewer services than they usually do for selling a house ● If the realtor represents both the buyer and the seller. ● If you are selling a move-in ready house and the agent doesn't have to do much work from their end ● If you are using the same agent for multiple properties ● If you seem to be a frequent buyer and seller, then they might give incentivize you for repeat business Home value in Florida rose by 25.4% in 2021 and is expected to rise even further in 2022. Because of the high demand for houses in the Florida market, it is easier for agents to close the deals, making negotiating commission rates favorable. How to calculate real estate commission? 1. Full-Service Agent If you hire a full-service agent, the realtor takes an average of 5.4% commission for a home sale. The total cost to sell a home in Florida is 7.1% when you include closing costs. Here is an example for easy understanding. 2. Fee-for-Service Agent: You must pay the buying agent according to your promised amount. In addition, you will give money to your agent for the selective services they offer. 3. FSBO In this option, the seller pays a 2%-5% commission to the buyer's agent and removes the seller's agent from the picture. Suppose the seller paid a 3% commission to the agent for a home worth $300,000, which will amount to $9000. This way, sellers can pay a flat fee to list their homes on MLS and manage marketing and paperwork to save 3%. 4. Leasing home If a tenant signs a lease for three years on a space that is 5,000 square feet at $20 per square foot, the total lease value would be $300,000.00. The total lease value is then used to calculate the commission for both representatives, usually 6%. This amount is then split between the landlord's leasing agent and the tenant's representative. The table below can be used to calculate your county’s average real estate commission. County Median Price as of 2021 Alachua County $2,48,668 Baker County $1,61,059 Bay County $2,35,053 Bradford County $1,27,770 Brevard County $2,71,021 Broward County $3,45,795 Calhoun County $98,018 Charlotte County $2,68,206 Citrus County $1,80,354 Clay County $2,48,719 Collier County $4,35,313 Columbia County $1,86,465 DeSoto County Dixie County $1,01,132 $90,523 Duval County $2,40,718 Escambia County $2,03,913 Franklin County $1,91,424 Gadsden County $1,09,735 Gilchrist County $1,18,780 Glades County Gulf County $88,447 $1,85,312 Hamilton County $92,368 Hardee County $96,173 Hendry County $1,08,973 Hernando County $2,06,270 Highlands County $1,67,092 Hillsborough County $2,92,565 Holmes County $1,06,898 Indian River County $2,77,041 Jackson County $1,14,163 Jefferson County $1,51,340 Lafayette County $1,20,736 Lake County $2,57,082 Lee County $2,92,688 Leon County $2,56,087 Levy County $1,21,889 Liberty County Madison County $86,602 $1,02,746 Manatee County $3,22,115 Marion County $1,86,893 Martin County $3,64,762 Miami-Dade County $3,80,443 Monroe County $6,51,995 Nassau County $2,83,853 Okaloosa County $2,85,502 Okeechobee County $1,22,235 Orange County $3,06,362 Osceola County $2,65,927 Palm Beach County $3,58,342 Pasco County $2,30,360 Pinellas County $2,77,343 Polk County $2,06,428 Putnam County $1,15,777 St. Johns County $3,92,732 St. Lucie County $2,67,824 Santa Rosa County $2,60,458 Sarasota County $3,25,911 Seminole County $3,17,964 Sumter County $3,25,190 Suwannee County $1,16,815 Taylor County $98,134 Union County $1,36,534 Volusia County $2,45,841 Wakulla County $1,63,243 Walton County $2,81,601 Washington County $1,30,537 Reduce your real estate commissions by doing this: 1. For Buyers ● Ask for a rebate If you are a buyer, the best way in which you can save thousands at closing is via a commission refund, which is typically 1-2.5% of the final sale price. Homebuyers can apply these rebates to their closing costs or, in some cases, even take the rebate as a cash payment. While this sounds like a great deal, most agents won't offer a commission rebate unless you request it before signing the representation agreement. 2. For Sellers ● Raise your home's value Your agent can help identify cost-effective ways to increase your home's value, including new paint, staging, and updating kitchens and bathrooms that can bring your home's price tag way up. This can increase both the net and the commission for your agent. ● Work with a flat fee agent Flat fee agents have become increasingly common these days. These agents sell a home for a flat fee rather than commission-based, which can be a huge potential saving for sellers. What happens when you fail to pay a commission in Florida? If you refuse to pay a real estate agent, the agent can take you to court and sue them for what they are owed. Get discounts on Real Estate Commission on these platforms: ● Simply Showing Here, you charged a 1% listing fee that saves sellers about $7,500 in commission. They provide experienced local real estate agents, professional photography, an MLS listing, negotiation, paperwork management, and contract support. ● Clever Clever offers pre-negotiated discounted realtor fees with its agent's network. A top-rated Clever agent will list your home at a 1% commission, so you get the same support from the realtor for a third of the price. ● Redfin It allows home sellers to list their homes for a 1.5% commission fee. So, sellers only pay Redfin and cut their commissions to half. ● Richr It is free to list on Richr; you pay $0 upfront and $699 at closing. You pay only if you sell, allowing you to cancel anytime. ● Trelora Sellers and buyers pay only a fair fee of 1%, collected at the closing. Florida Real Estate Commission Rules ● Seller non-payment of commissions 01. If a broker fails to pay a real estate agent commission, the agent must get a civil judgment against the broker. Before filing a court case, the agent should check the contractor agreement since it may require other forms of dispute resolution, such as mediation. 02. The Florida Real Estate Commission (FREC) will not force a broker to pay the agent's commission. 03. If the broker doesn't satisfy the judgment, the agent can file a complaint with FREC for violating the licensing law. (Section 475.25 (1)(d), Florida Statutes) 04. A licensed broker or agent who obtained a judgment against his real estate broker for unpaid commission could not claim recovery from Real Estate Recovery Fund if they acted as a single agent or broker in the transaction subjected to the claim. (Section 475.483 (2)(b), Florida Statutes) ● Commission levels 01. Commission levels are entirely negotiable. 02. A brokerage can charge a higher commission than it usually charges for a property that is hard to sell due to its location or other factors. 03. A listing broker and seller may agree on a flat commission fee, a percentage-based commission, or a combination of both. 04. No law entitles a broker to half the commission a listing broker receives, even if that broker acquires a buyer. ● Commission sharing and rebates Generally, a proprietor may not share real estate compensation with an unlicensed person. (Section 475.25(1)(h), Florida Statutes). However, there is an exception: you may rebate any portion of your commission to a transaction party if you make appropriate disclosures" to all interested parties." This should include any person or entity involved in the deal. (Rule 61J-), Florida Administrative Code. ● Sales agreements and commissions Most Florida Realtor sales agreements contain a statement that "all rights and obligations under the agreement automatically extend through an actual closing." This means that if the closing happens after the termination of the agreement, the broker is entitled to compensation. ● Commissions and rentals Most agents handling rentals automatically reserve their commission amount from a tenant's deposit money or advance rent. Any agent doing this should do it with great caution since there are several things to consider. Any funds not earned under the lease must be kept in an escrow account. Thus, funds should come out only from the landlord's earned money, ideally the first month’s rent. When contracts come into play, the tenant owes the landlord’s funds which may include a deposit or advanced rent. The landlord owes the landlord’s broker commission as per the lease agreement, and the landlord’s broker owes the tenant’s broker commission described in the MLS. When agents deduct their commission, they typically take a shortcut from how the money should flow based on contracts. FAQs Can an attorney collect Real Estate commissions in Florida? Florida licensees are not allowed to pay a fee or compensate someone for real estate services who don't hold a real estate license in Florida or another state – this includes attorneys. What is dual variable rate commission Real Estate in Florida? NAR defines the variable field as a form of compensation. The seller agrees to pay a specified commission if the listing broker sells or leases the property without assistance. And a different commission if the sale or lease comes through the efforts of a cooperating broker. Bottom Line: Sellers pay real estate commissions in exchange for the agent’s expertise and services. With an agent in place, you avoid the stress of navigating the complex process involved in sales. If you are in the process of selling or buying a home, we recommend interviewing several realtors and asking them upfront about their commission rates. This way, you will learn about the commission charged by different agents and negotiate with the best before closing. Also, note that the commission costs are somewhat inevitable; however, there are ways (mentioned in the blog) to negotiate the commission and even save yourself thousands of dollars.