As a real estate agent, you will earn your commission through two main strategies- direct sale or indirect sales. A direct sale is when you actively market a property to potential buyers yourself, without using a broker.
Indirect sales are those where you use a broker but you both work together to find a buyer. The seller pays their share of the commission to the broker, who then presents the offer to you for approval. If you agree that it’s a good deal and the seller wants to sell, they will take out the necessary steps to close the transaction with no broker involved.
This article will go into more detail about how much real estate commission you make per strategy, what factors determine how much you get paid, and some ways to maximize your income.
Disclaimer
The content in this article applies only to agents who use BrokerCheck to verify their credentials and to assess their compliance in acting in consumers’ best interests. It also does not apply to brokers who do not use BrokerCheck.
Many states have separate laws regarding disclosures to clients, which may be different from state to state. Agents must follow federal law as well as any state rules related to disclosure.
Realtor.com and RPAI (the professional association that represents residential realtors) each have their own website resources including articles and forums. You can also visit REIQ.
What does it mean?
Brokerage fees are paid to you, the broker, for your services as a member of the real estate team. These typically include a listing service fee, which is paid when the broker lists the property with the MLS or other listing sites like Zillow, Trulia and Realtor.com.
Next, selling agent compensation comes into play. This includes paying agents a sales commission, sometimes referred to as a seller’s premium, when they bring a buyer to you to make a sale. Also included in this cost is an agent commission if the agent is hired as part of the deal to represent the homeowner.
These costs can easily add up, especially if you’re buying or selling a large home that takes longer than expected. It’s important to know what all of these expenses cover so you don’t get taken advantage of.
Fortunately, you have us here at The Rich Shopper Team to help you save! We’ve done the research for you and have gathered information on some sneaky ways brokers earn money. Let’s dive in and see what we found.
How much does it vary?
As mentioned earlier, how much your agent earns is dependent on several different factors. The amount of commission they are paid varies greatly depending on their sales volume, what area they sell in, and whether or not they have the highest tier producer status with us.
However, there is one factor that doesn’t play into how much agents make beyond their own personal income skills and talent- motivation!
As sellers, we can help our agents achieve higher sale numbers by educating them about the market, encouraging them to advertise, and promoting going after the listings that may be out of their price range. They will also need some money to pay off debts and savings, so we must be careful to not influence their spending habits.
But aside from those reasons, there isn’t too much else that affects how much an agent makes.
What is important though is knowing that unless you are willing to go above and beyond for your seller, you will not earn as large of a paycheck.
Am I paying too much?
One of the biggest reasons people question whether or not they are receiving a good deal on their home is because they believe that they are being overcharged in commission. After all, when you put down a deposit on a house, you typically have an escrow account set up to cover the fees related to the property.
This way, the seller does not need to pay for those themselves as part of the sale. The broker usually covers these costs so that the buyer does not have to either. This is why it can seem like there is just enough money left over at the end!
However, what most sellers do not tell buyers is that many times this “remaining” money goes towards paying off past loans on the house. These expenses include mortgage payments, homeowners association dues, taxes, and insurance. All of these things add up very quickly, especially if you are trying to finance the rest via another loan.
Another reason that this leftover cash may be paid back to the original lender instead of going into your savings or other investments is due to ethical practices. Many lenders will take advantage of you by making it more expensive to borrow money from them than someone else.
This is called negotiating away the strength of their product and/or encouraging you to get more expensive financing options elsewhere.
Should I lower my list price?
While it is tempting to drop your list price, this can be costly in terms of lost sales and real estate commission. When selling a home, you are paid a commission depending on how much house you sell and for what amount. This depends on two things: Listing price and sale price!
When you drop your list price, you may lose money due to these reasons. First, some agents earn more per-listing than others, so they make more money off of the listing service fee. Second, most agents get a portion of the sale through their broker (this varies by state) – if you have to pay that person to work with you, they may demand a higher percentage of the sale to compensate for the additional cost.
Third, many sellers choose not to use an agent because they feel that the agent makes too much money. As brokers’ fees vary greatly from one area to another, it is difficult to compare like with like. What feels like a lot of money where you live might only seem expensive elsewhere.
What should I list my property at?
The most important thing to consider when listing your home is how much commission you will earn!
As a seller, your success in selling a house depends heavily upon how well you negotiate with buyers. A lot of sellers forget this fact, which can hurt their sales and profits.
Many instead use defaults that are either very low or too high and thus get poor results.
Default settings for pricing and listings are usually determined by what the previous owner paid for it and what agents tell sellers they must be so others can make more money off of yours.
How can I lower my real estate commission?
As a licensed broker, you are paid a certain amount of money for each property that you list with a company. This is your listing or sales commission.
The higher the price of the house, the higher your commission!
The more houses you have in business for Listingcom, the lower your overall commissions will be due to all of the discounts you get for doing lots of business with them.
You earn these discounts by bringing in large amounts of business to their platform. The more business they receive, the larger those discounts become.
There are several ways to reduce your real estate commission without having to drop your services completely. By dropping only one thing, you can save quite a bit of cash every month!
Here are some strategies for lowering your real estate commission. Try out any few for free before investing in ones that seem promising. You can also test out MyListingsAgent.com where you can work as an agent without being paying anything to learn how it works.
Will my clients pay less?
Even if you work for a small brokerage, there’s still an easy way to make money without paying any fees or commissions. You just have to be smart about it!
The easiest way to avoid real estate agent commission is to do your own marketing. This could mean doing your own research, listing your house yourself, producing your own videos, etc.
But what most people don’t realize is that many of these services provide you their materials free in exchange for you using them to promote their product. It’s a win-win situation!
By promoting their products using their material, you’re helping them get more sales which means they’ll reward you by giving you those materials for free!
It really is a great way to make some extra income while also getting some valuable resources for no cost at all.
Does the location matter?
As your real estate agent, you will earn commission from the sale of your seller’s home. This is also known as proceeds or compensation for services. But before you start looking at homes to sell, you must make sure that you have enough money to cover your living expenses while being active in the market.
If this isn’t the case, then it makes sense to look for lower cost housing first until your savings are back up and running. While it’s true that sellers typically get their own proportionate share of the commission, there are ways to maximize yours.
You can find out how much commission you should be seeking here! We’ve included some tips like whether or not to use a referral source and what things could potentially affect your commission. To save time, we’ll also include important information about what types of commissions exist and when they’re paid.
