EARNING COMMISSIONS vs. RECEIVING COMMISSIONS
There is a common misconception about commissions in real estate. The public eye often sees a big home sale and says “Wow, I bet those real estate agents must have made a fortune on that one. What an easy job.”
The truth is that the real estate agents involved were highly skilled professionals. The agents had probably put weeks, if not months into the sale of that home. It was their years of experience and expertise that allowed the property to change hands smoothly. In this case the real estate agent not only earned the commission, they received the commission.
For a lot of real estate agents it does not work out like the example above. For many real estate agents countless hours are wasted on transactions that never happen. I refer to this problem as “designed to fail”. Here are two examples of real estate situations that are designed to fail.
Real estate agents that spend time showing buyers homes before realizing or determining the buyers are not qualified to purchase a home are “designed to fail.” This situation wastes the buyer’s time, the seller’s time and due to negligence of the agent, their own time as well.
Another example is when an agent accepts a listing at a price that the seller can not afford to sell their house. You may laugh, but this happens. Sometimes real estate agents forget to ask a very important question. “How much do you owe on this property?” It is never safe to assume that the seller will “just make it work” in the end. The real estate agent should review a property profile before advising on a listing price. If it looks like money is going to be tight at closing, the seller needs to request a payoff from the lender ahead of time. By making sure that the seller can cover their closing costs, the agent will avoid negotiating contracts that cannot be fulfilled.
The situation of sellers coming up short at closing is one of the biggest instances of real estate agents earning commissions, but not receiving them at closing. When the seller does not have enough money at closing the first person that does not get paid is typically the listing agent. Next in order is often the buyer’s agent.
A lot of times there are other circumstances for sales not closings. These fall in the “it is always something” category. These situations occur when the unexpected rears its ugly head. The unexpected can range from sellers not disclosing items that they should have, to the buyers relying on down payment funds that took a recent crash in the stock market. When the unexpected situation occurs, a lot of real estate agents will say “I just didn’t see that one coming.”
The truth is that unexpected situations occasionally do occur in real estate, but most of time a skilled veteran of real estate can see these things coming from miles away and easily right the ship to avoid hitting the iceberg that will sink the sale. Most items that will harm a buyer can be identified very early in the process before too much time or money is expended by the buyer.
A true real estate professional earns and receives their commissions due to their experience and skill. Professional real estate agents do not make money because the job is easy, and certainly not because they are lucky.
Ryan Martin - Realtor®, e-PRO®
Your Bellingham Real Estate Professional | Bellingham Washington Real Estate
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