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
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."