One of our most frequently asked questions is how do REALTORS® get paid?

One of our most frequently asked questions is how do REALTORS® get paid? We are paid on a commission basis. In most cases, the seller pays a sales commission based on a listing agreement with the real estate company. In our area, a commission of 6% of the sales price is common for a residential listing. That 6% is split amongst the listing agency and the selling agency. 55% is awarded to the listing agency and 45% to the selling agency. However, this could be different in other markets. Then the agents that represented the buyers or sellers get a percentage of that percentage based on their experience and agency splits.

Sounds easy, huh? Well, let us look a little further into what it takes for the real estate companies to get paid. There are inspections, appraisals, financing and sometimes surveys. For the sale to be completed, all these things must work out for the seller and the buyer.

There are home, radon, mold, and pest inspections. These are usually recommended by the selling agent to be completed early in the transaction. If everything looks good and/or repairs can be agreed upon, then we move onto the appraisal. The appraiser must find comparable sales to be able to substantiate the sales price of the home. The appraisal is ordered by the lending institution and can take several weeks to complete. What is the REALTOR® doing during this time? He or she is making sure inspections occur on time, they are keeping their buyers and sellers updated and possibly preparing addendums for repairs or other changes to the transaction.

Let us assume all inspections have been completed and the appraisal comes in at or above the sales price. Keep in mind we have probably spent a good thirty days at this point in this transaction. Remember the REALTOR® is paid on commission, which means they are not getting a bi-weekly paycheck. The next step is that the loan will go back through underwriting with the lending institution to make sure all items have been taken care of to proceed to closing. The average closing time, in our area, from the day the offer is accepted until the actual closing is between 45 and 60 days. Your REALTOR® has not been paid during this time unless he or she has other closings that are taking place.

So now let us assume this sale is not going to happen. What could be the cause? The buyer could lose their job and/or financing, something could come up in the inspection that all parties cannot agree upon or maybe the home does not appraise. In this instance, the REALTOR® does not receive any commission.

Some may look at this as a negative. But I personally do not see it that way at all. Working for commission drives us to work harder. I learned years ago that commission-based sales were the best way for me to earn a living. I am driven by a challenge and by helping people achieve their dreams.

Have a great week and remember to do good things!