How do real estate agents get paid
If you're in the market to buy or sell a home, odds are you'll work with a real estate agent to help you through the process. According to the National Association of Realtors, 87% of buyers purchased their home through a real estate agent or broker in 2017, a share that has been increasing steadily from 69% in 2001. The vast majority of sellers also relied on real estate agents; only 8% of sellers sold their homes on their own.
As of March 2018, the average annual earnings for real estate sales agents was $40,587, according to salary.com. How much money agents make each year depends on a number of factors, including the number of transactions they complete, the commission paid to the brokerage and the agent's spilt with the sponsoring broker. Here, we take a look at how real estate agents are paid.
Real Estate Commissions
Most real estate agents make money through commissions – payments made directly to real estate brokers for services rendered in the sale or purchase of real property. A commission is usually a percentage of the property's selling price, although it can be a flat fee. To understand how real estate agents are paid, it helps to know about the relationship between an agent and a broker. Both agents and brokers are licensed by the state in which they work.
Agents are licensed salespersons who work under the umbrella of a designated broker. Agents cannot work independently, and they are prohibited from being paid a commission directly by consumers. Brokers, on the other hand, are able to work independently and/or hire real estate agents (salespersons). All real estate commissions must be paid directly to a broker, then the broker splits the commission with any other agents involved in the transaction. (For related reading, see: How Real Estate Agent and Broker Fees Work.)
The broker's compensation is specified in the listing agreement, a contract between a seller and the listing broker detailing the conditions of the listing. The rate of the broker's commission is negotiable in every case; in fact, it is a violation of federal antitrust laws for members of the profession to attempt, however subtly, to impose uniform commission rates. Commissions are taken out of the sale proceeds, and it's usually the seller who pays the commission, unless the buyer and seller negotiate a split. Most sellers factor the commission into the asking price, so it can be argued that the buyer pays at least some of the commission in either case (due to the higher asking price).
As of March 2018, the average annual earnings for real estate sales agents was $40,587, according to salary.com. How much money agents make each year depends on a number of factors, including the number of transactions they complete, the commission paid to the brokerage and the agent's spilt with the sponsoring broker. Here, we take a look at how real estate agents are paid.
Real Estate Commissions
Most real estate agents make money through commissions – payments made directly to real estate brokers for services rendered in the sale or purchase of real property. A commission is usually a percentage of the property's selling price, although it can be a flat fee. To understand how real estate agents are paid, it helps to know about the relationship between an agent and a broker. Both agents and brokers are licensed by the state in which they work.
Agents are licensed salespersons who work under the umbrella of a designated broker. Agents cannot work independently, and they are prohibited from being paid a commission directly by consumers. Brokers, on the other hand, are able to work independently and/or hire real estate agents (salespersons). All real estate commissions must be paid directly to a broker, then the broker splits the commission with any other agents involved in the transaction. (For related reading, see: How Real Estate Agent and Broker Fees Work.)
The broker's compensation is specified in the listing agreement, a contract between a seller and the listing broker detailing the conditions of the listing. The rate of the broker's commission is negotiable in every case; in fact, it is a violation of federal antitrust laws for members of the profession to attempt, however subtly, to impose uniform commission rates. Commissions are taken out of the sale proceeds, and it's usually the seller who pays the commission, unless the buyer and seller negotiate a split. Most sellers factor the commission into the asking price, so it can be argued that the buyer pays at least some of the commission in either case (due to the higher asking price).
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