This is probably one question I never get asked, but I have a feeling a lot of people don’t REALLY know the answer. I wanted to clear up any myths, and help answer it for anyone who may be curious.
Real estate agents earn their fee through commission, after a property has sold.
The commission is typically paid for out of the sellers proceeds. The amount of the commission is negotiated between the seller and the real estate agent listing the property (listing agent), this is done at the time the listing agreement is being presented, completed and signed. The commission is usually a percentage of whatever the sale price is. That commission is most commonly shared with another agent, the agent who represents the eventual buyer (buyers agent).
Real estate agents work for a real estate brokerage. Any fees or commissions earned have to go thru the real estate brokerage first. Real estate agents then have a commission split negotiated with their brokerage, depending on your production and/or experience these percentages can and does vary from agent to agent.
Here is an example:
- House sells for $120,000
- Commission $7,200 (I used 6% for this example)
- Lets just say the commission is split evenly, 3% each between buyer & listing agents. Each brokerage will get $3,600
- Lets also say the agent and the brokerage have a 50/50 commission split agreement (this split also varies from agent to agent). The agents will then get paid $1,800 (before taxes of course). That doesn’t seem so bad, right?
- Now lets say it took 6 months to sell, $1,800 / 24 week = $75.00 a week. That does not sound so great, but hopefully you have a few closing each month.
I hope this gives you an idea of how real estate agents are paid. Some people think we just throw a sign in the yard and when the house sells we get a $6,000 pay-day, that is not the case. And most of the hard work comes after the property has a contract on it. I will touch on that more in a later post……
Have a good night!