How Do Realtors Get Paid?

How Do Real Estate Agents Get Paid?

If you have bought or sold a home in the past, then you have probably worked with a real estate agent. If you're about to buy or sell a home, then you will most likely be working with one soon to help you get through the process. Even if you have never thought about it before, you realize that realtors make their money somewhere.

How Do Real Estate Agents Get Paid?

You may have wondered at some point how real estate agents get paid? The simple explanation is that they get paid a commission once the house is sold. We will dive into the complexities throughout the article.

Most people seem surprised to find that the realtors are paid from the listing side of the deal. This means that when a house goes up for sale, the listing agent and the seller will have already worked out the details of payment. This also means that the buyers are not typically responsible for any of the costs of the real estate agency or the realtors.

What percentage do most realtors charge?

Most commonly the selling agent will charge around 5-6% of the sale price as their fee for selling your home. However, they don’t get all 5-6%. When the home is sold the buyers will have their own realtor representing them through the process. Generally, the buyer’s agency and the seller’s agency will split the commission 50/50, leaving each of them with 2.5-3%.

An Example of a Real Estate Commission

Here is an example of how a real-life real estate commission works. The person selling the home and the seller’s agent will agree to a percentage. This is generally going to be 5-6%. Once they agree on the percentage, they will both sign a listing agreement that states the percentage of commission, and the duties that are expected of the seller’s agent.

What Gets Done

The listing agent will take pictures of the property, get the property description completed, and upload all the information to a Multiple Listing Service (MLS). MLS’s act as a marketplace for all the real-estate listings in your area. Once all of this has been completed then the listing will be uploaded to a real estate website.

As these things proceed the realtor will show the potential buyers the MLS on these real estate websites. At some point someone will decide that they are interested in the home. They will put in a bid on the property with a form called a residential purchase agreement along with earnest deposit money. If all things go well including the negotiation process, appraisal, inspection, and contingencies are completed without any issue then the deal will move into the closing stages.

Next Steps

During the closing process an escrow company, a third-party company, will handle all the money throughout the transactions. The escrow company will take the listing fee out of the money and then give the rest of the money to the companies that are employing the agents. Yes, the money will go to the companies that the agents work for, it will not be given directly to the agents themselves.

How Buyer and Seller Agents Work Together

Both the seller’s agent and the buyer’s agent work under the umbrella of an agency. They are technically self-employed, but they still work with an agency. Think of a real estate company in your area and all the realtors that work for that company.

Because of this, their agency will receive their portion of the sale as well as the broker above them. The agency will split the money in a predetermined fashion and give the agent what they earned from the sale.

For example, if a home sells for $200,000 then the seller’s agency will receive $6,000 dollars (assuming 6% commission). It will be split between the buyer’s broker and the seller’s broker at $3,000 each. If a real estate agent refers a client to another agent, generally in another market, then the referring agent will typically be paid a 25% fee from the buyer’s side commission.

How Listing Agents Make Money

Only brokers are legally able to list homes for sale in Summerlin (or elsewhere); real estate agents themselves are not. All the commissions go through the brokers on both the buyers and sellers’ sides. Listing agents will represent the sellers. They oversee all the marketing and listing materials and footwork that goes into getting the house sold.

What Listing Agents Do

Listings agents do many things to get your house sold, which may include internet marketing, printing the listing in papers and for sale magazines, personal website, company website, billboards, and more. They oversee listing their client’s home on all the different online and publication platforms possible, and they oversee having professional photos taken of your home.

They will host open houses, stage your home, and manage the local MLS listing for your property. They will write the description for your home and they will be the main contact for any other realtors wishing to show your home, and any buyers making offers when that time comes.

How Buyer’s Agents Get Paid

Buyers agents sometimes have it easier because the listing agent has already done most of the work for this property. This does not mean that the buyer’s agent doesn’t have anything invested or work to do. The buyer’s agent may have put in a lot of work to get these buyers to want your home.

What Buyer Agents Do

Searching for homes, driving around, calling the buyers back and forth with potential listings, and more. All the realtors in your area are going to have to work around each other and with each other to get their names, their individual brands and their agencies built up.

Summary

Listing agents must put forth a lot of effort to get a home sold to receive their profit. Buying agents must do a fair amount of their own work to get their commission, but it is in a different fashion then the sellers’ agent. As discussed in this article, this is how your realtor makes their income.

Buyer & Seller Resources

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