How Realtors Get Paid

How Realtors Get PaidPeople that are unfamiliar with Real Estate often have concerns with engaging an agent because they are unfamiliar about who and what they will have to pay. The following will explain how Realtors get paid and whether or not you will owe a Realtor money when you work with them.

Realtors don’t make a salary. Compensation for a Realtor is 100% based on what they sell or help people buy. That is what is referred to as commission.  Most real estate transactions involve 2 agents; One representing the seller, and one representing the buyer. But who pays who?


When a seller enlists a Realtor to sell their home, the seller and Realtor agree on an amount that is going to be paid to the Realtor upon successful sale of the home. This is typically designated as a percentage of the sale price of the home. As an enticement to get other Realtors to help sell the home, the sellers Realtor offers out a portion of that commission (a co-op fee) that will pay another agent to bring them a buyer.  As a seller, the commission you pay compensates the agent that represents you AND the agent that represents the buyer.


The great news about buying a home is that you get free advice! Since the sellers agent pays out part of their collected commission to compensate an agent that brings a buyer to the transaction, it means you get to go shopping with your agent knowing that the fee your agent receives for being a part of the transaction will be taken care of by the listing agent. Now, every agent can choose to write their agreement with their clients differently and for different amounts so be sure to ask your Realtor to go over the agreement with you before you start working with them. That way you know the specifics of your agreement. If you have questions, please feel free to ask me.

Note To Sellers: Why Less Isn’t always more

You will encounter agents that will not negotiate their commission and you will encounter some that will. Most top agents will not reduce their commission except for special circumstances (like multiple transactions etc…) because they don’t have to.  Agents that can’t differentiate the quality of their service from their peers only have one card to play when it comes to trying to earn your business…and that is to reduce their price. When making your decision on whom to work with, be sure to pick your agent based on the quality of service you will be receiving, not the commission you pay.

You want an agent that is a full time professional that knows what they are doing, will work hard for you, represent your home correctly, negotiate on your behalf, and keep you from getting sued (See Sellers Realtor Guide). If you hire a Realtor that is willing to work for less, you have done some top line negotiation that could save a few thousand through the transaction. HOWEVER, if they price your home wrong, reveal your motivations, or get you sued, it could easily cost you 10-20k+++ off your bottom line.

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