How Are Realtors Paid?
I mentioned in a previous post about how loan professionals are paid that I would write about how Realtors are paid.
Of course, the seller who lists his house with a Realtor knows how it is done because he or she signs the contract to pay a certain amount to the Realtor. The listing contract specifies that when the house is sold, the real estate broker will be paid a certain percentage of the sale.
The agreement is between the seller and the listing real estate broker. The buyer is not a part of this agreement at all. It is generally left to the listing licensee to decide how much to pay a cooperating real estate broker for finding a buyer. This amount is then posted on the listings that is seen by the Realtor.
When the buyer’s Realtor looks at the listing they can tell exactly the percentage they will receive if they sell a house. They may be paid 2% on the sale of one house and 3% on the sale of an identical house down the street. Some people feel that a licensee will show the house with the higher commission and ignore the other. In my opinion that may be true but it is not common. Most buyers representatives look out for the benefit of their buyer regardless of the commission amount.
It is expected among many Realtors that the listing broker will share the total commission equally with the buyer’s licensee. They feel that they should get an equal share of the commission because the transaction would not happen without a willing buyer. However, it is not necessarily the case that the commission is shared equally.
While an equal share of the commission may be an expectation, that is not necessarily what is done. Nor is true that the commission should be shared equally.
Some local listing licensees will give the buyer’s realtor less than 1/2 the commission, and some will give more than 1/2 the commission to help attract a buyer. It would be in the interest of the seller to know how the commission is being shared. If the seller knows and is in agreement with the method that their licensee is using than everything is cool.
Buyers should also know how, and how much, their representative is being offered to sell a particular house. In today’s slower market we are seeing more and more ‘BONUSES”, offered to buyer’s representatives if a particular house is sold. I wonder what a buyer would think if their Realtor showed them a house in which he was being paid 3 1/2% commission but did not show them a similar house that only had a 2 1/2 percent commission.
Let’s have a little transparency here…it will help all of us in the long run.
If you want to work with a Realtor who gives you many options on how to pay, and how much to pay…check out my consulting articles. And if you want specific numbers where I have a sliding scale from $150 all the way to a 7% commission, give me a call. My cell is 907 232–7900