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A Guide to Real Estate Commissions

Understanding Real Estate Commission

There is no doubt that real estate commissions are hard-earned money. An agent works a lot to help buyers and sellers locate and sell   properties, often including a lot of negotiation, listing the home, assessing the asking price, showing the home, mediating between sellers and buyers, and much more. In the end, the work of the salesperson is compensated with a commission, which is usually a percentage of the home’s selling price. However, things are not as simple as they may seem when it comes to paying and receiving real estate commissions.

The seller pays the real estate commission in the United States. However, the commission does not entirely go to the agent as many people assume. In fact, real estate agents only retain a portion of their real estate commissions while the rest goes to the company they work for, which is a designated broker. The greatest problem with real estate commissions is not establishing the percentage or negotiating. It is related to when these real estate commissions are actually received. Although agents may conclude the contract of sale today, they will not get their commission paid today. In fact, they are bound to wait for several months, sometimes more than 4 months to receive their commission. This determent can give rise to many different problems for the real estate agent and brokers.

Although they make a sale today, real estate agents cannot afford to stop working until they get their commission for that one sale. They have to continue working for their next commission and so on. It is a circle of commissions that they must revolve in at all times in order to ensure steady income. However, each day of work involves a small investment in business and marketing expenses. With such a huge gap between the sale day and the closing day, it is almost impossible to keep going in between commissions without alternative funding.

Financial pressure and the love for the field determine many real estate agents to apply for commission advances. The commission advance has become an easy, cost effective, and efficient way to gain access to real estate commissions faster. When waiting to receive the commission is not an option, a commission advance is the only way to effectively get out of a stressful situation and continue doing business with minimum costs.

Real estate commissions may seem substantial, but the fact is that they don’t come with the same regularity as a pay check. Living and doing business on real estate commission involves smart income and budget management skills and a profound knowledge of the real estate laws that govern real estate commissions. It is a lot more difficult to manage pending money that real money and making the right decision is often a veritable challenge.

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