HOW REAL ESTATE AGENTS ARE PAID
Real estate agents, unlike professionals in different categories who bill by hourly rates or earn a salary, get paid through a transaction (commission) at the end of each sale. For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction goes through to settlement (closes) based on the selling price of the home. At that point, the commission is earned. The commission itself is negotiated, in most cases, between the seller and the listing agent. Typically, an agent will earn a commission between 5% and 6% of the sale price, which will be split between the listing agent and the buyer’s agent. Even though some agents are associate brokers, or brokers in general, all commission payments are instructed to go through to the broker who’s managing the brokerage where the agent is working. From there, the commission is then split to the agent and the broker, according to the agreement that’s been made. The split will vary; sometimes, newer agents will earn a small portion of the commission compared to the experienced or successful agents who generally have higher earnings.
PAYING THE COMMISSION ITSELF
The overall commission is paid for at the settlement period by the seller. The fee is taken from the proceeds of the sale of the home or the property. However, it could be said that the buyers pay the commission because they’re literally paying the price to purchase the house, while the sellers take the commission for the agent into account during the process of determining the price for the listing.
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