How Does a Real Estate Agent Get Paid?

Posted by Premier Commission on April 03, 2014 in Real Estate

People tend to associate real estate agents with huge commissions and a life full of luxuries and accomplishments. The fact is that real estate agents work incredibly long hours trying to accommodate both the needs of the buyers and sellers. They have a long list of responsibilities that clearly justifies their substantial commissions. While many people speculate about real estate agents and their commissions, very few people actually know how agents really make their money. So, how does a real estate agent get paid?

Real estate agents are paid on commission, which is typically paid by the seller of a home. The commission represents a percentage of the sale contract, traditionally between 5% and 6%. However, real estate agents are not allowed to act independently and therefore they must work under the umbrella of a broker. It is the broker that gets paid the entire commission, and real estate agents are not paid directly by the seller, but their broker. Depending on the experience of the agent, the brokerage can pay the real estate agent as little as 30% of the commission split or as much as 95% in case of successful or veteran agents.

Another situation that commonly occurs is when two real estate agents represent separately the buyer and the seller. There are two possible scenarios: one in which both agents work for the same broker and one in which the agents work for two different brokers. So how does a real estate agent get paid in such cases? In the first case, the broker will split the commission between their two agents as per their agreement.  The Agents may split the commission evenly or not.  . In the second situation, the commission paid by the seller gets split between the two brokerages and is paid out by both brokers independently.

Although agents work hard to make sales, they are not paid at the time of the sale. They get paid at closing, which can mean anywhere between 30 days and 120 days, depending on each particular property sale. This creates a gap between the moment in time when money and time is invested in a certain deal, and the actual time when the agent gets paid for his or her work. This delay affects the lives of many real estate agents and brokers, who might have to wait months to actually receive their hard-earned commissions. The uncertainty of when an agent will receive their income makes it difficult to manage cash flow and predict income.

So, how does a real estate agent get paid? The agent can choose to get paid immediately after the sale day with a commission advance or can wait to receive the commission in full up to 120 days.

Waiting to receive commissions until closing can only be avoided using a real estate commission advance. Real estate agents can apply for an advance online with a commission advance company like Premier Commission.

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