• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Real Estate Career Site

Real Estate Career Site

Businesses Worth Owning!

  • Get Started NOW

How Do Real Estate Agents Get Paid?

December 26, 2018 by Steve Williams

It might seem like an awkward question to ask when you first meet with a potential agentabout selling your home – amid all the conversations about staging, marketing and open houses – but it’s necessary to discuss and negotiate exactly how your agent will be paid before listing your home with any broker.

Real estate agents are paid in a variety of ways, depending on who they work for, where they live and what services they provide for you, but the overwhelming majority are paid as a percent of the sales price once a transaction is completed. The National Association of Realtors 2018 Profile of Home Buyers and Sellers reported 77 percent of sellers pay agents a percent of the sale price.

Real Estate Agent Commission

How commission works for the buyer. Typically, the buyer is off the hook when it comes to paying real estate commission to either agent involved in the deal. However, sellers will often factor in the amount of money they’ll lose to commission when they calculate their asking price and keep it in mind during negotiations.

In some scenarios, a property listing will include in advertisements that only 1.5 percent of the buyer agent’s commission is covered by the seller, leaving the buyer to make up the difference separately or the agent to take less money. But this is rare and typically occurs in a special situation like with a bank-owned property. “That’s the only place I’ve seen it where the buyers shoulder some of that burden,” says Kendred Manceaux, a broker associate with Keller Williams Realty in Austin, Texas.

Even in those situations, it’s not uncommon for the buyer agent to opt out of additional payment from his or her client. “They want the client to have the house – it’s not a stopping point,” Manceaux says.

How commission works for the seller. More often than not, the seller establishes a commission rate when he or she lists with an agent, and that commission is typically evenly split between the listing and buyer agent.

The total commission rate is typically between 5 and 6 percent, though Manceaux says some listing agents that go beyond the usual services will see 7 percent. When an agent is part of a larger brokerage or team, the commission is additionally divided, depending on the brokerage, the number of people who worked on the deal and other factors. In a brokerage like Redfin where agents make a salary, the total commission is lower, most often 4.5 percent of the sale price.

But it’s not simply a matter of knowing the percentage or flat fee your agent will expect from a transaction. Your agent’s commission or payment is part of a larger discussion of the services and work that go into buying or selling a home. “It’s a critical conversation that every consumer should have with their agent about the services they receive when working with that Realtor and how that agent will help them to achieve the best possible result,” says Boomer Foster, president of Long & Foster Real Estate.

The Discussion Sellers Should Have

Every real estate transaction is unique, so don’t think there’s one blanket policy when it comes to how your agent will be paid.

“The home seller should be thinking in terms of fairness, and just 6 percent across the board isn’t fair to the home seller – and in some situations, it’s not fair to the Realtor,” says Greg Hague, CEO of Real Estate Mavericks, a real estate coaching firm based in Scottsdale, Arizona.

In one of your initial meetings, and before you sign an agreement to list with an agent, compensation should come up. But compensation should never be the deciding factor when picking an agent.

Most important in selecting a listing agent is your comfort level with the agent’s experience, the agent’s previous success and his or her plan to market your home. Manceaux recommends discussing how your agent is paid and being conscious of the amount. But focusing too much on negotiating for a low rate could leave you with subpar service, leading to more time on the market for your home, lower offers from potential buyers or a difficult negotiation process. “You get what you pay for,” he says.

During early meetings with potential agents, Foster recommends that sellers ask questions specific to their home: “Do they know the local market? Do they have the negotiation skills needed to get you the best price? Do they serve as your trusted partner through the process?”

In his work coaching agents nationwide, Hague recommends varying the commission percentage based on the circumstances of the deal. He says if the seller ends up having a friend interested in purchasing the home, an agent shouldn’t necessarily charge 6 percent because they didn’t perform the legwork. But if the agent manages to find a buyer quickly and at or above asking price, Hague says there should be a reward for high-quality work.

The agent and seller should discuss all compensation scenarios before signing an agreement and stipulate the possibilities in the contract itself, Hague says. If a seller is interested in putting in additional effort by seeking buyers or even showing the home, discuss the option and how it may affect the commission rate.

“When they decide that this Realtor really looks like he or she would be the right Realtor, then they bring up the fee structure and say, ‘Look, you are our choice if you’ll be fair on commission – fair to us, fair to you. Let’s talk about some of these scenarios,’” Hague says.

Atypical Selling Situations

Alternative forms of payment for real estate agents include a flat fee for either full service or individual tasks completed, ranging from helping prepare the home for market to writing up an offer for the buyer.

As the largest real estate company to approach compensation differently, Redfin offers across-the-board savings on fees and compensation when using its brokers. For sellers, Redfin charges 1 to 1.5 percent for its split of the commission – with a minimum that varies by location but is typically $4,500 – combined with a negotiated commission for the buyer agent, which is often in the traditional market range.

When a homebuyer is represented by a Redfin agent, he or she could potentially receive a commission refund for between 15 to 45 percent of the buyer agent commission from the deal. However, commission rebates are prohibited in several states, including Alabama, Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon and Tennessee.

Agents working in a traditional brokerage for commission may also opt to refund a share of their pay from the deal, where allowed, to the homebuyer they represent, though it’s less likely to be a blanket policy for an entire firm.

In other situations, where the home may be for sale by owner, for example, the party that pays the agent may change. Rather than having the seller issue commission, the buyer could choose to pay his or her agent out of pocket, reducing the offer on the house by 2 or 3 percent to account for the commission costs.

However, buyers who will be financing their purchase often want to include the commission in the total mortgage amount in order to save cash for their down payment or other out-of-pocket moving costs. In this case, the seller would still pay the buyer’s agent once the transaction is complete.
Download this app for live home listings comprehensive real estate buying and selling information:
Mobile URL;   http://app.kw.com/KW2SU68YQ
Mobile Text Code;  KW2SU68YQ
My Agent Code;  KW2SU68YQ
QR Code;
  
Complete the information below to learn more about careers with Keller Williams Realty.
(Article compliments of:  https://realestate.usnews.com/real-estate/articles/how-does-your-real-estate-agent-get-paid?int=undefined-rec, By Devon Thorsby, Editor, Real Estate |Dec. 20, 2018)

Sharing is caring! Go ahead and share this post...

Facebook Twitter Google+ Pinterest LinkedIn Email

Primary Sidebar

Recent Posts

  • KW Opportunity Map
  • Leading with Energy
  • 10 Ways KW Is Commanding the New Real Estate Reality
  • A Historic Quarter For Keller Williams
  • The Top-Rated Workplaces for Veterans in 2019

Archives

  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018

Categories

  • Profit Share
  • Uncategorized

Footer

Take Your Career to The
Next Level


Apply Now


Get Started Today!

Get Started Today!

This site is hosted and maintained by Michael Tritthart Design and built in association with Aaron Kaufman of Moving Careers Inc. It is independently owned by a Keller Williams associate and all Trademarks referred to within this website are the property of their respective trademark holders. These trademark holders are not affiliated, nor do they sponsor Keller Williams Realty.



Privacy Policy