How Does Real Estate Agents Get Paid?

How does real estate agents get paid?

After a deal is finalized the next question arises how does real estate agents are paid? Well,  real estate agents get paid on a commission basis and it tend to range anywhere from 5% to 10% of property’s sales price. Although the commissions are negotiable between the real  estate broker and his agent.

As we know real estate agents are hired by designated real estate brokers so all commissions paid to a real estate agent runs through the broker. All real estate commissions are paid firstly to a broker, then the broker splits the commission with the agents who brings a buyer to the table.

How Does Real Estate Agents Get Paid?

The seller and the agent enters into an agreement in which seller gives broker the rights to advertise their property. The seller agrees to pay a commission to the broker, in turn, if they succeed in bringing a buyer for a deal. The time and expenses incurred on marketing, advertising and promotion of the property and preparing it for sale, may be deducted from the total payable commissions. So the commission paid cover all those services too.

Every real estate transaction is different, but generally real estate professionals are paid   at the end of the deal when transactions are completed. They will receive the commission only after the transaction goes to settlement, regardless of who buys it.

In general, no fee is paid to the brokerage without a ensuing transaction. They aren’t paid for their time they invested in bringing or searching for the buyer. The money earned by the agent directly depends upon the number of transactions they settle each year. The commission earned is also based upon the customer satisfaction as reviewed by the company.

How Does Real Estate Agents Get Paid?

The next point of consideration is that how the commission is compensated by the sponsoring broker? The commission is evenly split between the broker and the agent at the settlement table according to their contract they have signed with his or her brokerage company.

The commission may vary depending upon the experience of the agent. The newly hired   agents earn a small share of commission while the experienced ones receive a larger percentage of the commission or the ones who sell more expensive properties may  get a higher percent of share.

Now the question is who exactly pays the real estate broker? Whether it is buyer or the seller? The real estate agent fee is paid by the seller while buyers generally pay nothing to the agent who represents them. The seller directly pays the commission to the listing broker who,   in turn, shares part of it with the agent involved in the transaction. Thus, buyers aren’t responsible for any costs, it is just the sellers who has to pay the commission.

Apart from this, there are some exceptional cases in which seller pays the buyer’s commission and buyer pays the commission directly.

In dual agency agreement where the agent represents both the parties that is, seller as well as   the buyer, then he gets to keep the total fee after the deal is finalised as they are operating from both the sides.

Besides commission, there are some seperate fees that are different  from the real estate   agent’s commission that must be paid at the termination of the deal. They may include loan costs, insurance fees or any other taxes.

It is important to discuss all the agreements about how the agent will be paid before you list your property with some brokerage company. The agent and seller should discuss all the terms and conditions before signing a contract.