The question of how Real Estate agents get paid is a significant one. As new models have emerged in the real estate market, there are additional ways for agents to get paid.
Real Estate agents usually get paid on a commission base; they close on the sale of the property, and then they get paid. Some newer payment models have emerged where agents may get a salary instead of taking less commission. Most of the commissions an agent earns will be split between the listing agent, listing broker, buyer’s agent, and buyer’s broker.
How this commission is split between these parties will depend upon the agreement between the agents and brokers.
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Most Real Estate Agents Only Get Paid If They Make a Sell
Most real estate agents today work on the traditional model of where they will get paid only when a house or property is sold. Most real estate agents are paid for their services through their commissions.
That means if they make the sale of the property, they will get paid; if they do not, they will not. Usually, the commission is a percentage of the sale of the property; other times, but less commonly, it could be a flat fee.
That is why how much a real estate agent gets paid can depend upon a lot of different factors, including:
- How many properties the real estate agent can sell.
- For any commission, they can work with a broker to split the commission for a sale.
- A single commission is usually split several ways as follows:
- Seller – Real Estate Agent, also known as Listing Agent
- Seller – Real Estate Broker, also known as Listing Broker
- Buyer – Real Estate Agent or the agent represents the buyer’s interests.
- Buyer – Real Estate Broker is the broker who employs the buyer’s agent.
The way the commission for the transaction is split will depend upon the agreement between the various agents and brokers. But most real estate deals may involve several people getting paid, even if you do not directly work with them.
A typical split would be that 60% goes to the agent and 40% to the brokers. But other commons splits would be 50% to 50% or 70% to 30%. The ratio and split will depend upon the agreement for the sale.
The agent and broker model is the traditional model in real estate. A licensed agent will work under the umbrella of a broker who helps ensure that the agent complies with all the state and national real estate laws.
Agents cannot receive commissions directly from their clients; they must work through a broker.
A broker can work independently and even hire agents to work under them as their employees. In this case, all the commissions are paid directly to the broker, who will split the commission with the broker.
This can get very confusing as both the agent and the broker can have the title of realtor if they are members of the National Association of Realtors (NAR), but an agent and broker do not hold the same state license.
Agent Employee Model
As it is not easy for every agent to work without getting paid monthly for some basic expenses, some Real Estate Agencies have started what is known as the new model for real estate. In this model, the agents may receive a paycheck, but they will not get the complete commission for their sales.
Usually, for this kind of setup, the company may even provide the leads to the agents and control who and what they sell to. In this new model, the agent is paid monthly, earning less on their commissions but receiving a paycheck each month.
The agents also are not getting as many referrals from the clients as they work less as independent contractors and more as an employee of real estate agencies.
This kind of setup may work for some agents as they may like having the monthly salary and some of the leads that some of the larger agencies may offer.
Even under this newer employee model, the real estate agent would still need to perform and sell if they hope to keep their job. The company would want to ensure that they sell enough to cover the agent’s salary, expenses, and other costs.
If you are working with a real estate agent, it is tough to know their deal with their broker and how much they are getting paid. Knowing how many parties are paid from the commission can be challenging.
But when you consider that many commissions can be divided into four different parties, the amount each party receives may not be as high as you initially thought.
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Related Questions
Can You Take The Real Estate Exam Without Taking Any Classes?
Becoming a Real Estate agent in the United States requires you to take a real estate exam for the state or area where you want to sell real estate. Each state will have some slightly different real estate laws.
By clicking here, you can read more about Can You Take The Real Estate Exam Without Taking Any Classes?
Why Is Real Estate Called ‘Real Estate’?
The word Real Estate comes from the Latin word realis, but it refers ideally to the physical and economic characteristics of real estate or real property. The word Real Estate can date back to the 17th Century. Real Estate is a legal term used in many English-speaking jurisdictions worldwide.
By clicking here, you can read more about Why Is Real Estate Called ‘Real Estate’?.
