Most of the time, Real Estate Agents get paid on commission. When representing a buyer or a seller, the agent will have an agreement that both parties sign agreeing to a certain amount of commission. In most cases, the seller of a property will agree to a co-broker agreement which offers the buyers side of the transaction a certain percentage of the sales price. The buyers representative may then decide to not ask for any additional compensation since he or she is then paid by the listing broker.
The math would look something like this:
A seller hires a listing agent to sell his property. In the listing agreement, the listing broker/agent is getting paid a total of 6% when the property closes. It is agreed between the seller and the listing agent that 3% will be offered to the buyer’s agent.
The House sells for $600,000. The total Commission the Seller agreed to pay is 6%.
$600,000 X .06 = $24,000 of which $12,000 will go to the listing agent and $12,000 would go to the buyer’s broker/agent.
Depending on your brokerage model, you may pay a percentage of your sale to your broker. Typically, brokerages will charge a per transaction fee or a percentage of the transaction. Some real estate companies have a “cap” which means once you pay in a certain amount, you keep the rest until a certain date at which time your fees will begin again. Most work from a 12 month cycle.
If your real estate company is a national franchise, you may also pay a franchise fee.
There are some companies or teams that offer a salary or a draw, yet this is not the norm. Commissions are those of high risk, high reward. The risk comes in the form of no guaranteed income. As a real estate agent, it’s up to you to earn your income. As with any business, your income will be in direct proportion to how you lead generate and work your business.
It’s important to note that moneys are exchanged broker to broker. Each office will send distrubtion checks after the closing process. Your office will then distribute your monies after they take any fees owed to them. You will be responsible for your own taxes.
If you are building a real estate business, do yourself a favor and read MREA, The Millionaire Real Estate Agent. The more you learn about a real estate agent business model, expenses, profit and loss sheets, and growth, the more empowered you will be to succeed in your real estate career.
Interested in learning more about becoming a real estate agent? Lori Ballen has run a top real estate business for years and is here to connect you with people and resources to guide you through your real estate journey. Reach out to Lori Ballen.