How Does A Real Estate Agent Get Paid?

Real Estate Broker/Owner with Franklin Homes Realty LLC

How Does A Real Estate Agent Get Paid?

This is a question that far too many real estate agents think consumers understand. Unfortunately, too often that is not the case.

Real estate agents are independent contractors which means we work on 100% commission. We do not get paid until the homes we are selling close.


How Does A Real Estate Agent Get Paid?Most agents work for a brokerage company such as RE/MAX, Keller Williams or Coldwell Banker but some may own their own brokerage.

My license is with Benchmark Realty LLC in Franklin TN. I am not an employee of Benchmark. Benchmark Realty receives a portion of my commission for providing me with services I require to operate my business. However, as an independent contractor, I am free to run my business the way I want. The only caveat is I don't violate the National Association of REALTORS® Code of Ethics or Benchmark Realty company policy.

Consumers usually understand real estate agents receive a commission as a listing agent but don't understand how buyer's agents get paid. It's really quite simple.

When a home is listed, the seller agrees to pay the listing agent a commission to sell his home. That commission varies from state to state, anywhere from 5 - 10% of the sale price. That 5 - 10% is then split between the listing agent and the selling agent (buyer's agent). The seller is paying both agents from the commission agreed upon with the listing agent. Neither agent gets paid until all the requirements of the contract have been met and the home closes.

How Does A Real Estate Agent Get Paid?At closing, funds are deducted from the seller's proceeds to pay the two brokerage companies where the listing agent and the selling agent have their license posted.

The brokerage companies will then take their piece of the pie, which can be as much as half of the agent's commission. The brokerages then cut a check to the agent.

Seems simple right? But then who pays the agent to work the open house or the agent who answers my questions on the phone or who may even take me out to see a few homes? No one.

These agents are working events and showing homes in the hopes of meeting new clients. They don't get paid an hourly rate to work open houses or show properties. They hope to sell you a home and collect the commission.

Real estate agents work far more hours than buyers and sellers know to get their clients to the closing table. All of that work goes unpaid if the buyer or seller does not close on the sale of a home.

Can you imagine working 100 hours or more and then not getting paid? It happens all the time to real estate agents.

How? You ask. Mostly, because consumers don't really understand the many risks we take upon ourselves to sell homes.

For example, listing agents have a multitude of expenses to market your home. If your home doesn't sell, they may be out those funds with no chance to recoup their expenses.

How Does A Real Estate Agent Get Paid?Buyer's agents have even more risks than listing agents do. Do you know how many times people will use an agent to take them out to see homes and then cheat the agent out of a commission by using another agent to write the contract?

The buyer's agent is spending hours and gas money to drive prospective buyers around. Remember, he doesn't get paid until he sells a home and it closes. If the buyers decide to use someone else to write the contract, the agent who drove them around gets nothing. Not even a reimbursement for gas expense.

The next time you meet an agent at an open house who is willing to help you find a new home, remember, he doesn't get paid hourly to help you. He gets paid at the end of the transaction which means the purchase of your new home.

The same is true of listing agents. They put lots of money out front to market your home. They don't get any of that money back until your home sells and closes. If your home doesn't sell, they are out those funds.

I can't think of another business who provides this type of service without getting paid for their expenses.

P.S. If you are looking to buy or sell a home in Franklin TN, then contact Tammie White today at (615) 495-0752.

Posted by
Tammie White, Managing Broker/Owner
Franklin Homes Realty LLC
Franklin, TN
(615) 495-0752 
This posting with the content written here and photographs displayed are the intellectual property and opinions of Tammie White of Franklin Homes Realty LLC. Any party who uses this material without the written permission of Tammie White is subject to copyright infringement and possible lawsuit.

Re-Blogged 18 times:

Re-Blogged By Re-Blogged At
  1. Ellie McIntire 02/10/2012 02:39 PM
  2. Ron Cooks 02/10/2012 07:49 PM
  3. Anne M. Costello 02/10/2012 08:38 PM
  4. Merv Edinger & Associates 02/10/2012 11:02 PM
  5. Joy Carter & Jeff Booker Brother and Sister Team 02/11/2012 01:31 AM
  6. Cyndi Mino 02/11/2012 01:39 AM
  7. Cyndi Mino 02/11/2012 01:48 AM
  8. David Burrows 02/11/2012 01:57 AM
  9. Debbe Perry 02/11/2012 02:04 AM
  10. Diane Morales 02/11/2012 03:18 AM
  11. Amanda S. Davidson 02/11/2012 05:52 AM
  12. Kathy Sheehan 02/11/2012 06:22 AM
  13. Teral McDowell 02/11/2012 06:41 AM
  14. Julie Baldino 02/11/2012 07:04 AM
  15. Charles Walk 02/12/2012 11:58 AM
  16. Mary Borth 02/12/2012 02:24 PM
  17. Michael Collins 02/13/2012 04:17 AM
  18. Tonda & Steve Hoagland 02/14/2012 04:40 AM
  19. Charles Stallions 02/16/2012 02:24 PM
Home Buying
A Realtor's Life
Diary of a Realtor
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Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Ciara - Definitely.

Adam - Thanks.

Jeff - So true. I'm absolutely sure our clients don't recognize that.

Gay - I want to give the buyers the benefit of the doubt and think that they don't know this, rather than think they are just using us to show them houses with no intention of buying with us.

Margaret - I agree. Rather than be afraid to brooche the subject, we have to spell it out for them.

Greg - You suggest that if we provide good service, we'll get paid but you compare us to people who get paid regardless of their service. That was exactly the intention of this post. I provide a service, I need to get paid. Just like my mechanic, barber, doctor and lawyer do. My mechanic doesn't say, "Take it out and drive it for 2 weeks, if you like what I did, drop a check in the mail." I pick up my car and I pay him. That's all I want from buyers and sellers to be compensated for my work.

Cindy - I'm working towards that same goal.

Brenda - I didn't go into all the expenses we incur. I just wanted to let consumers know we don't get paid if I don't sell them a house.

Barbara - That's exactly what I'm talking about. Buyers think we get paid to show properties. Terrible misunderstanding.

Nathan - Thanks.

Marcia - Frustrating, isn't it?

Joan - Now we're getting too technical.

Ellie - It was re-blogged quite a bit.

Sharon - Aw, that was so nice. Thank you.

Karen - I agree.

Kathy - This is just the basics.

Carie - I hope so.

Sandy - They don't get it.

Cheryl - Yes, it is. I do too.

Ron - I was trying to make it easy to understand.

Anne - So few people work on 100% commission anymore.

Merv - I've seen agents get that. I really didn't go into all our expenses. That is a subject of another post. I just wanted to make sure they understand we don't get paid for showing homes. We actually have to sell one.

Gita - Thanks for stopping by.

Jack - Thanks.

Jared - That makes two of us.

Jo - Every state has their own rules/regulations.

Kathleen - Once again, it's very clear consumers don't know this information.

Joy - I have actually seen buyers user another agent even with a signed buyer's agreement. Which just solidifies my point that consumers don't always get it.

Sylvie - Hearing lots of this today.

Michael - So true.

Margaret - All the more reason to have a buyer's agreement.

Debbe - Thanks for the re-blog.

Thomas - I like that...I'll have to remember that line for future reference.

Peter - I hope to visit Australia one day. So happy you found my post.

Martha - I sometimes think we're afraid to explain it. We're worried they won't sign a buyer's agreement. Then we're probably better off.

Ginny - I see it all the time.

Peggy - Working REOs, that's when you put in a lot of hours.

Scott - Smart guy.

Liane - Agreed.

Derrick Team - They should see our tax bills.

Christine - I see it all the time.

Ann - They should see some of the expenses I rack up.

Michael - Yes, it is.

Dennis & Sunshine - We need to educate them.

Karen Anne - I drop-off the check to my office and they issue a direct deposit to my account the same day. I don't even have to run to the bank.

Mike & Kate - I agree. I was guilty of that early on.

Suzanne - Thanks for visiting.

Rachel - I hope so.

Kimo - Interesting.

Shunta - I hope you found it helpful.

Lisa - We need to get better at working with people who respect our time and expertise.

Amanda - Thanks for the re-blog.

Laura - Then we would be a taxi service.

Teral - Thanks for the re-blog.

Not a Realtor - I can't address how real estate is handled in NY but if I ever get a client who wants to buy there, I already have a very good AR agent to refer them to.

Kim - Thank you.

Bill - That's why we need to better educate them.

Karen Anne - Only you would do that.

Chanda - WOW!!

Margaret - Isn't she?

Not a realtor - I prefer commenters identify themselves.

Karen Anne - Always so helpful.

Bill - Thanks for the support.

Gene - I agree.

Feb 11, 2012 04:29 PM #92
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

To Not a Realtor:  I politely tried to tell you above that the more you (pontificate)... blabber... the sillier you look.  Every comment you make... it becomes more obvious that you do not have much of a clue.  You speak in a way that is demeaning of other Realtors and agents... yet you say you don't give your name because of potential "backlash."

I sense a decent degree of insecurity in you.  That is usually the case for those who try and speak as "experts"... yet are afraid to use their names.

Tammie does NOT need any correction.  Her post is just fine.  There is nothing in her post, nor in her comments... that is not true... in her market area and State.

Tammie's office is in a suburb of Nashville... and I am sure that there are some decent differences between the way Tennessee Realtors conduct their business... and how Realtors do in your state.

By the way... this is not a "blogs"... this is a post.

Now... I will try this again.  The more you talk... the more obvious it becomes that you just don't know what you're talking about.  Honestly, if this is the "normal" you we are seeing... no wonder you don't want people to know what your name is.

Think about it.

Feb 11, 2012 06:02 PM #94
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Tammie, great post and thank you for mentioning that buyers "cheat" (unknowingly) agents when they jump from one to another.  If this could be solved we would all be much happier.

Feb 11, 2012 08:00 PM #95
Peter Michelbach
International, IT
i Sell Real Estate

Hello again Tammie,  it is my pleasure reading your personal inspirational posts, and I am truly grateful of having had this tremendous opportunity of seing real estate 'life' parameters as embraced from the perspectives of my valued AR colleaugues. Thank you ALL for the opportunity

Being on  'International' status I had initially some problems getting access to all posts, but thanks to the friendly and so helpful San Jose Agent, Kathleen Daniels, all worked out well in the end.

Tammie, regarding Australia, it is a great country, welcome!, please let me know when you're planning to come. Be well.

Feb 11, 2012 11:24 PM #96
Marnie Matarese
Showing you the best of Sarasota!

Wow.  Sometimes you have to wonder if it is even worth the effort to write anything when there are so many negative and hateful people out there.  Great post, and to illustrate your point, I had a buyer today ask me how much I charge to help her find a home.  She was not sure if she could afford to use a realtor.  She was amazed that I would work with her and only get paid if she closed on a home.

Feb 12, 2012 10:31 AM #97
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Not a Realtor - It seems that your intent is to discredit me. Maybe you're actually one of my competitors and that's why you've chosen not to identify yourself. What I shared above is exactly what happens here.

This post is a simple explanation to buyers and sellers stating the facts about how and when I get paid. Everything stated above is correct. I am an independent contractor, I abide by the rules and regulations governed by the state of TN, I am affiliated with a broker, I am free to pursue my business as I please as long as I work within the confines of the law in TN. I am doing that.

Karen Anne - Don't waste your breath.

Bob - Yes, we would.

Peter - I'm happy you were able to work that all out. If I ever get to Australia, I'll definitely look you up.

Marnie - Let's face it, many people just don't understand the process.

Feb 12, 2012 02:34 PM #98
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Marlene - Thanks for stopping by.

Feb 12, 2012 03:56 PM #100
Jairo Arreola
Lotus Group Realty - San Jose, CA
VA Home Loan Specialist - SF Bay Area - South Bay

What a great explanantion. It was a great read and hopefully more people understand us =)

Feb 12, 2012 05:27 PM #101
Kasey & John Boles
Jon Gosche Real Estate, LLC - - Boise, ID
Boise & Meridian, ID Ada/Canyon/Gem/Boise Counties

I was going to say what #83 said, that sometimes the pay split to your brokerage can be MORE than 1/3 - up to 50% or more, of course in addition to that we have our own marketing and business expenses as well.  I think how we get paid and beyond that, how MUCH we get paid, is very misunderstood amongst the public, -Kasey

Feb 12, 2012 05:48 PM #102
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Jairo - Hope so.

Kasey - I've amended the post to reflect 50%. However, I didn't really want to go into all our expenses. I was trying to make sure that buyers and sellers understand, no closing, no pay.

Feb 13, 2012 02:34 AM #103
Sean Williams
AcklesWilliams of Semonin Realtors - Louisville, KY
Your Louisville Realtor

I think far too many agents think buyers understand this. It is important to tell this to them upfront.

Feb 13, 2012 02:45 AM #104
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Sean - Agreed.

Feb 13, 2012 03:24 AM #105
Michael Collins
*ROCK REALTY|Broker|Realtor|Real Estate|WI Short Sale Agent* - Janesville, WI
CDPE, SFR , Wisconsin Short Sale Specialist Realto

I can't help but re-blog this one. Thanks Tammie!

Very well written!

Feb 13, 2012 04:18 AM #106
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Michael - Thanks for the re-blog.

Feb 13, 2012 04:52 AM #107
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Tammie - came from the reblog by Charles. Itis a never dying discussion, and our expenses is not the reason for the fees. Qualification is, experience, knowledge is.

Feb 16, 2012 02:50 PM #108
Sonja Patterson
Keller Williams - BV - College Station, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

Tammie, a very thorough yet easy-to-understand explanation of how we make a living! :)

Feb 16, 2012 03:01 PM #109
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Jon - That's why I didn't go into that. I simply covered that we don't get paid until we get to the closing table.

Sonja - That was my goal.

Feb 16, 2012 11:19 PM #110
Matt Robinson
Professional Investors Guild - Pensacola, FL

Great point Tammie.  We have a little report entitled, "How Do Real Estate Agents Get Paid" that we send out to buyers, especially when they are 1st time buyers.  Before I got into real estate, and I was clueless, my wife and I drove around neighborhoods looking for homes because we "didn't want to pay a realtor."

Jul 26, 2012 06:14 AM #111
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Matt - Lots of people think that. It doesn't hurt to explain right from the beginning how we get paid.

Jul 26, 2012 03:19 PM #112
Alyse "Aly" Sands
Village Real Estate Services - Nashville, TN

I couldn't have put it better myself.  I spent a number of years losing valuable time and money and being upset about being used.  Now I explain this in a buyer presentation that I do before I will put a buyer in my car.  In this presentation I inform them of the Buyer Agreement and I tell them that, after the presentation, they get to decide if they'd like to move forward with me as their agent and that, if they want to move forward, the next step will be to customize a search for them.  They almost always say yes and that's when I pull out the buyer agreement which I go over with them.  Once it's signed, we start with everything pertaining to their needs.

Mar 18, 2013 11:38 PM #113
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