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How Realtors are Paid

I've been selling real estate for three years now and I have to say it is surprising to me how many people misunderstand how Realtors are paid. I think that sometimes it evens affects their decisions on who to work with. This blog is meant to clear up some of the myths and give you as the consumer a clear picture on how the process works.

Basically, the people selling the house pay a commission to their listing broker based on a percentage of the selling price. The listing broker then splits this commission with both the buyer's broker and their respective agents.

Seller pays 6 - 10% commission to listing broker

3.2 - 5% retained by listing broker

2.8 - 5% paid to the selling broker

listing agent and selling agent are paid by their respective brokers

For Example:  Let's use $100,000 dollars because it is an easy number to work with.  Let's say you sold your house for $100,000 and you were paying Broker 1 a 7% commission.  Broker 1 would receive $7,000.  But Broker 2 sold the house so Broker 2 would get (let's just say half) 3.5% or $3,500.  Then each broker would split their side of the transaction with their respective agents.
 

Did you know...

  • Sales associates are self-employed, and recieve no salary or benefits. We get no paid vacation time, insurance, company cars or expense accounts from the firms we work with.
  • Sales associates are only paid for results - if and when we successfully complete a property transaction.
  • We are paid the same whether a buyer purchases a home listed by my own company or another broker.
  • As independent contractors, sales associates have ongoing out-of-pocket expenses similar to those of any small business.

Some of those business expenses include:

  • Property advertising
  • Advertising and marketing my services
  • Marketing materials and direct mail
  • "For Sale" signs, "Open House" signs, "Pointer" signs
  • Lock boxes
  • Total inventory marketing fee
  • MLS access fees
  • Computer hardware and software
  • Long distance, cellular and/or paging service
  • Postage and courier fees
  • Business cards, stationary, office supplies
  • Business insurance, self-employment tax
  • Continuing education courses
  • Personal assistant (salary, taxes)
  • And, some pay monthly office rent

 

Your Best Move for Southern Indiana Real Estate

Brett Mumaw REALTOR®

Semonin Realtors

3707 Charletown Rd. Suite 1A

New Albany, IN 47150

(812) 542-9057 Office

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Comment balloon 3 commentsBrett Mumaw • October 20 2007 01:29PM

Comments

So many people think that both sides of the transaction make all of the commission, and both the broker and salesperson get all of the commission, and after all of our expenses, we get all of the commission... and gas is free, too. 
Posted by Lane Bailey, Realtor & Car Guy (Century 21 Results Realty) almost 13 years ago
This is a good post for Selling Listings to view.  The cost are never determined until the end.  Note if it is an over priced listings cost go up!  The bottom line is we are cut short of the number everyone will see for commission.
Posted by Gary Bland R (S) E-Pro, ABR (Hawaii Life Real Estate Brokers) almost 13 years ago

Lane - That is why I posted this, for information.  All we can do is educate.

Gary - It is even more reason NOT to take over priced listings.  I heard one agent who used to say "I'm sorry, but I can't finance your dreams."

Posted by Brett Mumaw, Your Indiana Move (RE/MAX First) almost 13 years ago

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