How Real Estate Agents Get Paid

On a $100,000 transaction: Listing "side" receives 1/2 of the total commission and Buyer "side" gets the other 1/2. If the same company is both the list and buy side they get the whole check! But, most transactions involve more than one agent, even if they are in the same company.

Each "side" is then divided again. For newer agents (non ASRs) their share may be around 50% of what the office receives in the transaction. For more experienced agents, the % may be higher. So, back to the $100,000 sale.

Sell Side Commission: $3000 - (Company % + Agent %) = 0

Buy Side Commission: $3000 - (Company % + Agent %) = 0

For a 6% commission, each side gets $3,000. Each office splits that according to the agreement they have with their agent(s). If the average home takes 90 days to sell, then the office takes in $16.67/day. If the agent gets 1/2, then the agent takes in $16.66/day or $500.00/month. And yes, they do work every day. Sometimes they just take one phonecall, but most of them are available 7 days a week by appointment. That is how real estate agents get paid.

So next time someone says, "Those real estate agents make sooooo much money," you can explain how real estate agents get paid. Of course you hear about the agents who sell higher dollar properties. So how many of those are there really?

Interesting notes:

1) If the average home price in the US is under $300K, then most agents will have to close at least two different $300,000 homes every month to pay expanses AND have an income.

2) The average agent sells less that 10 homes a year.

3) Not all commissions are 6%.

4) Not all listings sell in 90 days.

5) A home that sells in less days than the average for that area was underpriced. A home that sells in a week or a day? The seller left a lot on the table, and the agent got paid extra. Why extra? Because they didn't have to do what they would with a correctly priced listing. That is how real estate agents get paid fast. Those are the stories you hear about.

6) No company or agent gets paid unless the deal closes, except in special circumstances involving lawyers and judges.

7) Most states require continuing education for real estate professionals, and they have MLS dues, license fees, technology to be available seven days a week, technology to stay aware of what's for sale (in my area there are 2 different MLS systems), health insurance, self employed state income tax and federal income tax, personal advertising from business cards to web space, and so on.

8) Most companies recommend a new agent have six months income in the bank before becoming full-time.

9) 76% of real estate agents earn less that $30,000/year.

10) Only 7% of new agents renew their license.

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