Some folks never put much thought on how realtors and real estate agents make their money. You will find professionals who receive their fees elsewhere and not from the buyer while some get a commission from their sale. But once you are decided to sell your house or buy a new one, this is usually the time when people start wondering how do realtors get paid.
At times, buyers get surprised when they learn that realtors and agents get their commissions from the selling side of the deal. What this means is that the fees get negotiated between the seller and the listing broker. When the house is sold, the seller’s agent splits the listing fee that the seller paid with the buyer’s agent.
You must also know that there are some agents who represent their buyers for a flat rate. There are also some agents who work on an hourly basis, but this business model is not popularly used. So far, the most common practice followed by realtors and agents is the commissions being split between the buyer’s representative and the listing broker.
The normal process of buying a house starts with the buyer’s agents showing their clients some of the homes listed for sale. Usually, both the prospect buyer and the realtor visits the property and assesses whether it is a place they want to buy. After this, an offer is made through a residential purchase agreement with an earnest money deposit. Assuming that everything goes smoothly and both parties are on the same page, the deal will proceed to the closing stage.
The closing stage is when the escrow, or also called a neutral third party, handles the money. Once the property is paid, the commission will be split into two, which are then disbursed to the agents directly or to the companies for whom the agents work for.
When it comes to the responsibilities of real estate agents, only brokers can list homes on the market. Even if you work with an agent and agree on the terms, their broker is the one legally holding the listing. Which means the broker also gets a percentage of the money paid by the seller of the house. Brokers will naturally get some type of commission from the house sale. After all, they are in charge of listing the home and of marketing it as well.
For brokers, their typical fee is usually from 5% to 6% (which is then shared to the agent as the realtor’s commission) as a reward for listing your property and marketing your house. They do this by posting property listings on their personal website, official website, internet ads, mailers, yard signs, and print publications. They also handle the telemarketing and social media exposure of the property.
Not all real estate transactions are made equal and the real estate agent fee is part of the equation. That is why you need to do your own research before embarking on such a big investment so that you understand all the costs associated with such a deal. A lot of money can be made in real estate, but some people have lost money as well. So pay attention and do your homework.