How Realtors Work (and get paid) -- the mysteries revealed!

Real Estate Agent with Cummings & Co. Realtors

What a great post, thank you to Lori Cain who wrote this article!

Original content by Lori Cain License #142914

This discussion includes the duties & responsibilities of the Listing & Selling Realtors who work together to sell your property or find you the perfect home.

Listing Your Property

When you decide to sell your home, you will hire a Realtor to "list" your property. Realtors will charge the Seller a commission, such as 6%, which is what we'll use in this discussion for sake of easy math. Half of this commission goes to the listing Realtor and the other half is offered to a selling Realtor. When your property is advertised on MLS (Multiple Listing Service), another Realtor may bring you the Buyer and earn the 3% selling commission. Sometimes the Listing Realtor will sell your home. If a prospective Buyer calls your Realtor to see your home and decides to write an offer, your Realtor will assist both Buyer and Seller and thus, earn both commissions.

Listing Realtor's Responsibilities

The Listing Realtor is responsible for marketing your property to consumers AND to cooperating Realtors. This may include a mix of internet advertising, print advertising, open houses, brochures - all done at the expense of the individual Listing Realtor. If your Listing Realtor is Susie with ABC Real Estate Company, please understand that Susie is paying for all of this advertising and will not recover her investment until your home is sold. Her company may offer discounts on some of this advertising, but still Susie pays for it - not the company.

Buyer's Realtor

Our MLS systems are very sophisticated and allow Realtors to create very customized searches. If a Buyer tells me that they wish to live within fifteen minutes of their office; want to spend between $250,000 and $275,000; they want a 2-level home with the master bedroom on the first floor; they want a fenced yard, an inside laundry and a minimum of 2,000 square feet - I can search for that. IF YOUR home meets the components of this search criteria, your home will come up in my search, and I'll show your home to my Buyer. IF my Buyer makes an offer on your home, I will earn the 3% selling commission.

If your sister's home is listed with a Realtor, there's no need to send me a flyer and ask me to sell it in order to get the 3% selling commission. Your sister's property will come up in my Buyer's search if it meets my Buyer's criteria. And, please don't ask me to take a look at your sister's home and offer staging advice. Your sister already has a contractual agreement with her Listing Realtor, and it would be unethical and illegal for me to interfere.

Buyer's Realtor's Responsibilities

Please don't be offended that a Realtor will insist that you are pre-approved with a Lender BEFORE we take you out to show you homes. We don't want you looking at $200,000 homes if you can only comfortably afford a $175,000 home. It would be irresponsible of a Realtor to show you homes without assurance that you have your ducks in a row and will sail through Underwriting without a hitch. We will also ask you to sign a "Buyer's Broker's Service agreement," where you commit to working with us and will be responsible for our commission if we are unable to obtain it through regular means. I've never had to ask a Buyer to pay my commission, but we do not work for free. If I show you fifty homes and spend hours of my times and gallons of gas, you would understand that I would be upset if you found a "For Sale by Owner," (FSBO) and decided to purchase it on your own. I always tell my Buyers that if they see a FSBO that interests them, please provide me with the phone number and address. I'll happily ask the Seller to pay my commission if I bring them a Buyer, and they are generally happy to do so.

How much Realtors REALLY earn

Finally, Realtors pay a portion of our commission checks to our Brokers, depending on their individual agreements with their brokerage. So if Susie from ABC Real Estate Company is listing your $100,000 home and Joe from XYZ Real Estate Company brings the Buyer, both Susie and Joe will pay their company a portion of their commission.  Neither one gets a check for $3,000, and remember that Susie paid to market your property and Joe spent time, energy and gasoline showing his Buyers homes. And because Realtors are self-employed, we still have to pay our Social Security taxes, license renewals, association dues and other general business expenses.

And how much did Susie spend to earn your listing? Has she been mailing you newsletters with market updates for the past two years? What did Joe spend to motivate that Buyer to work with him? Has Joe been advertising on the internet or mailing to his circle of friends and neighbors?

Let's work as a team!

If you understand how Realtors work, we are more likely to have a smooth and stress-free transaction together. We work with our Sellers and Buyers as a team, and if we all understand our responsibilities and goals, the more likely we are to pop champagne at the closing table!!


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