How Do Realtors Get Paid?

Reblogger
Real Estate Broker/Owner with Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside

Dear Readers -

Mimi Foster of Colorado Springs, Colorado has been a mainstay of Active Rain for many years. This post gives a clear and comprehensive explanation of Real Estate Commissions.

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Other wonderful posts from Mimi include: "Tenant From H*ll"   -  "Nosy Neighbors" "Watch What You Say"  -  "Repeat Referrals""Please Get Out"  and "What ActiveRain Is NOT". Every time  Mimi Foster  writes, the reader gains the option to learn so much more!

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Thanks for stopping by!  ----  All the best - Lynn

 

Original content by Mimi Foster

What is a typical real estate commission?

Many people believe being a Realtor is similar to being a money magnet. Not only is this a misconception, but I don’t know of any other business where a professional can put in countless hours on a transaction and possibly end up empty handed. Let me explain how a Realtor gets paid.

Most Realtors are paid on commission based on sales price of the property. THERE IS NO STANDARD COMMISSION. A real estate professional can only tell you what their company charges to list a property, not what other companies charge. It is against Federal law to “price fix,” so each company has their own policy.

For the purpose of this article, we will use 6% as the commission base and a sales/purchase price of $300,000. Wow! you’re thinking? That Realtor is getting paid a lot to sell a $300,000 house! Unfortunately, that is not the case.

Most Realtors work for a real estate brokerage. When they are hired (usually as an independent contractor), there is an agreement with the brokerage as to what “split” the company will keep and what the Realtor will be paid from the commission. Every firm is different. The Realtor is not paid directly at closing but the money is paid to the brokerage who then pays their Realtor their portion.

Commission splits can be anywhere from 50%/50%, 90% to agent/10% to brokerage, 70% to brokerage/30% to agent. It depends on so many factors, but each agent has their own agreement with their company.

man shuffling papers at desk

Who Pays the Real Estate Agent?

In most situations, the Seller pays the company that lists the property, also known as the Listing Agent. Of the 6% paid to the Listing Agent, 3% of that amount is paid to the Company representing the Buyer. As a general rule, listing side and buying side split whatever commission was agreed upon when Listing Agent took the listing.

Also during the time a contract is entered into between lister and homeowner, it is agreed upon how much Listing Agent will make if there is no other Realtor involved (the Listing Agent working for both the Buyer and Seller). So it is silly to think you’re going to go to the Listing Agent to get a “deal” off the price of the house. That is rarely the case because it’s been agreed to before the house goes on the market. What you really get is a lack of your own representation.

tiny house with red roof money keys

So how do Realtors get paid, actually? In this scenario, each company gets 3% ($9,000). Depending on the split, let’s say the company gets $2,700 (30%) and the agent gets $6,300 (70%). Of that $6,300, the agent (again, an independent contractor) will have to pay income taxes, federal and state self employment taxes, liability insurance, dues and fees, MLS fees, all advertising costs, assistants, etc. It also takes (on average) four to six weeks after you have an accepted offer until closing, a long time to wait to get paid.

A fair amount is taken out of the agent’s check. What it looks like they’re making is not at all what they’re taking home. A Realtor can work for days/weeks/months with a Client, but if something unforeseen happens and there is no closing, then there is no payment at the end. In addition, they can go several months without a sale and have no income, or have several sales in one month. Budgeting is important.

All of this is based on generalities, but that’s a brief overview. Please ask if you would like further information. I’m here to help.

Originally published as How Do Realtors Get Paid? by Mimi Foster

Selling homes throughout Colorado Springs, Old Colorado City, Manitou Springs, and surrounding areas

 

     

Mimi Foster

(719) 460-7570

CALL OR TEXT

Mimi has received the honor of being voted one of the best Realtors in Colorado Springs five years in a row. With over two decades of experience, she is committed to making the home buying/selling process as painless and enjoyable as possible. Read Full Bio…

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Comments (5)

Bill Salvatore - YVP Blog
Arizona Elite Properties - Chandler, AZ
Realtor - Valley of the Sun / golfArizona@cox.net

Mimi was right on!  Great post, thanks for sharing.  Make it the best Taco Tuesday.  Bill Salvatore

Apr 13, 2021 05:26 AM
Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

I always tell people that everything is negotiable and I think it is very sad that so many agents these days are unable to negotiate themselves a fair commission.  I have a feeling all of these discount agents won't be in the business after the boom, yet their damage will have already been done.

Apr 13, 2021 05:48 AM
Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Service and knowledge will always be valued and sellers will appreciate the efforts put forth by a professional. 

Apr 13, 2021 06:28 AM
Mimi Foster
Falcon Property Solutions - Colorado Springs, CO
Voted Colorado Springs Best Realtor

What a lovely tribute! I thank you most sincerely. I would love to get back in the swing of things at AR. I know they've been working hard to once again make it a great place to be. Thanks so much for the acknowledgement.

Apr 13, 2021 06:43 AM
Lynn B. Friedman CRS Atlanta, GA 404-939-2727

And we, as a community, would benefit so much from having you here more regularly! All the best - Lynn

Apr 16, 2021 07:54 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lynn and here I thought that Realtors worked just for the fun of it, what a bonus to get paid as well ☺️☺️☺️

Apr 13, 2021 03:23 PM
Lynn B. Friedman CRS Atlanta, GA 404-939-2727

Yes, imagine that - (eventually) earning money for three months of work!

Apr 16, 2021 07:55 PM