How Do Realtors Get Paid?
How do Realtors get paid? That is a great question and one I get asked a lot. There are different models of real estate agencies so there are many different ways a real estate agent or a Realtor can get paid. I will describe the most common.
The first thing you need to understand is that Realtors do not get paid a salary. Unless they are on a team or in a company that has that type of agreement, they do not get paid on a regular basis, like an employee does. Most Realtors are independent contractors, not employees. That also means that they do not get the benefit of health insurance, life insurance, retirement, or taxes being paid by their company.
When you hire a Realtor, whether you hire them to help you sell your house, help you buy a house, or both, you do not pay them anything up front. In most cases, they do not get paid until the closing. If you are a Buyer, you typically don’t pay for the services of a Realtor, the commissions come from the Seller at closing. If you are a Seller, you don’t pay for services until your house sells.
So, let’s look at these two scenarios:
- You want to buy a house. You meet with a Realtor and decide to hire them to help you find your dream home. They spend their time and money searching the MLS, internet, calling For Sale by Owner sellers, driving to show you properties. They give feedback to other agents based on showings, research comparables, advise you when they write up an offer, negotiate on your behalf, all the while making sure you are protected and are following the contract. They attend home inspections and appraisals, make/answer phone calls and emails from you as well as other agents, vendors, appraisers, title companies, lenders, etc. Once you own the house, they get paid.
- You want to sell your house. You meet with a Realtor and decide to hire them to sell your home. They may pay for a lot of services to sell your house. Some of those services are: professional photography and video, professional measurement, a company to schedule showings at your property, professionally designed marketing material and mass marketing programs. They buy professional signs and lockboxes. If they hold an open house, they have marketing material and possibly balloons and snacks. They spend their time getting feedback from agents and customers who see your house. They advise you when an offer is received, negotiate on your behalf, all the while making sure you are protected and are following the contract. They attend appraisals, make/answer phone calls and emails from you as well as other agents, vendors, appraisers, title companies, lenders, etc. Once you have sold the house, they get paid.
In most cases, Realtors spend a lot of time and money to help you buy or sell a property prior to receiving a paycheck. Some agents and companies may ask for some payment upfront as well or an extra fee at closing so make sure you ask these questions ahead of time. (This blog may help.) I have had a lot of great clients through the years. I have also had a few who took advantage of my service. Your Realtor should do a great job for you as well as respect your time and money. Remember to do the same for them.
Photos courtesy of watcharakun and stockimages via freedigitalphotos.net
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.