How does a Realtor get paid?

Industry Observer

One of my first time homeowners asked a really great question - How does a Realtor get paid? And another client, who had not purchased a home in quite a while, asked a similar question "Is a Realtor still paid by the seller? "

The majority of Realtor's work on commission. The rate of commission is determined, and agreed to in advance of a sale, or transaction, by the Realtor and their client. This should be a signed agreement so there is no confusion in the future!

Most Realtors are paid their commission by the seller's closing costs after the closing of a home. BUT, if a buyer of a home, and their buyer's agent, have agreed to pay their agent a certain commission, and the seller does not agree to meet that commission price, the buyer's closing costs may reflect the difference. The seller does not have the right to change the commission offered in the Multipe Listing Service (MLS), after an offer is made by a potential buyer.

Buyer's agents may work with For Sale by Owners (FSBO) in finding the right house for their client. In doing so many FSBO's may not pay a commission to an agent. This is when a buyer's agreement would kick in and the Realtor would be paid by the buyer's closing costs.

Realtors' are not allowed to be paid directly. Closing attorney's send all checks commission checks to the brokers, who in turn pays the agent.


Comments (2)

Leslie Helm
Tennessee Recreational Properties - Jamestown, TN
Real Estate For Trail Riders

Many sellers who are faced with a low offer now expect the realtor to lower their commission. They may not realize that when a certain percentage is published in the MLS, the listing agent may be willing to "shave their commission" in order to get the deal to the table but cannot commit the selling agent to taking less without that agent's permission.

Sep 20, 2009 03:12 AM
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

Greart idea for a post. I need to write up something similar and direct my buyer's to it. This is something that a lot of the public doesn't understand. I think a lot of buyers think that we're paid by the hour (or at least sometimes it feels like they are trying to help me earn a lot of money that way =)

Sep 20, 2009 04:04 AM