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Home sales and commissions: How are Realtors paid?

Home sales and commissions: How are Realtors paid?

October 31, 2020

How are Realtors paid

Realtor Commission Advance

The real estate agent (whether a Realtor or not), broker, buyer and seller can all have roles to play when compensating real estate professionals for their work. While you most certainly understand the basics of how you’re paid for your work as a real estate agent already, a review of the basics related to how Realtors are paid and a deeper dive into the specifics can help you build a broader knowledge base that you can leverage throughout your career.

Realtor, broker, buyer, seller: The different roles involved

Depending on your point of view as a real estate agent or Realtor, you might say your broker or the seller pays the money that eventually becomes your commission.

 The seller — and not the buyer — is usually responsible for paying the commissions that go to the real estate agents and brokers on both sides of the transaction. However, the buyer may pay them if they are eager to close the deal. Additionally, the buyer may ultimately provide the funds if the seller included the cost of paying the real estate agent broker and agent commission in the sale price, pointed out.

 That money must flow from the seller or buyer to the broker before it reaches the hands of a buyer’s agent or listing agent, though. When a deal is finalized, including the payment of closing costs and fees and ensuring all documents are properly signed and completed, the party providing the realtor commission funds will pass that money along to a broker.

 The buyer’s agent and listing agent are then both paid their share of the commission, with the buyer’s broker and seller’s broker both keeping their portion of the proceeds. This ultimately how a real estate commission reaches the hands of a real estate agent or Realtor.

 Commissions are vital for real estate agents to understand because they are usually the major — or only — source of income for professionals in this field. While exceptions are starting to become more popular, real estate commission is still king.

 Real estate brokerage Redfin, for example, provides a salary and bonuses as opposed to following the traditional commission-only approach that is so common for Realtors, real estate agents generally and brokers. Other brokerages may follow similar models as well.

 There are no legal or regulatory requirements that force a listing agent or buyer’s agent to be paid by commission — it’s simply a matter of convention.

Realtor commission percentages and unique situations

The percentage charged in terms of real estate agent and Realtor commissions can vary greatly. It can change from one listing to the next, between brokerages and every vary among agents working for the same broker.

 The most common percentage used is 6%, split between the parties previously detailed. That number can easily vary, however.

 A Consumer Federation of America survey of real estate agents found the commission rate covers a range between 7% on the high end and 4.5% on the low end.

 Additionally, a brokerage may charge a flat fee and include a percentage in a listing agreement intended for the other broker and real estate agent involved in the transaction. Finally, some brokers and Realtors may be willing to negotiate percentages, while others will stand firm.

Dual agency in real estate presents a unique set of circumstances when it comes to the commissions for a real estate agent. These professionals represent both the buyer and seller, acting as a neutral party. A dual agency situation can also arise when two agents working for the same brokerage represent the buyer and seller separately,Trulia pointed out,

 In these situations, the real estate agent’s commission percentage often remains the same, but the dual agent and broker earn more because there is only one of each involved. It’s important to note that dual agency is illegal in several states, according to The Mortgage Reports, so it’s not always an option for real estate professionals to represent buyers and sellers in the same transaction.

Commission advances for Realtors and real estate professionals

While alternative forms of compensation are starting to increase in popularity to a degree, it’s common for a real estate agent or Realtor to be compensated chiefly or entirely through commissions. These large payments are incredibly valuable, but also come on an irregular schedule. And, of course, delays in closing on a listing can add even more uncertainty into the mix.

 If you’re a real estate agent or Realtor, Just Commission Advance provides professionals just like you with cash advances on pending sales. That means accessing the money you’ve already earned on a schedule that aligns with your needs. Check out our FAQ page to learn more and apply for your advance today!