How Much Do Brokers and Real Estate Agents Make?
Real estate agents pay a commission for every successfully sold home. This commission is generally around 5-6% of the sales price.
But an agent won't necessarily take the entire 5-6%.
The broker's commissions are often split 50/50 between the seller's agent (or "listing agent") and the buyer's agent.
However, whether they represent the home seller or the home buyer, both types of real estate agent are paid by the seller when the sale is complete.
Since commissions can be high, it makes sense to find your real estate agent.
Look for the best price and service, just like you did when choosing your mortgage lender.
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Real estate agent salaries
Real estate agent salaries are not based on an annual or hourly wage. Instead, most brokers only make money after a home has been sold.
This income is in the form of a commission that is a percentage of the home's selling price. So the salary of a real estate agent depends on the selling price of the houses in which he works.
The National Association of Realtors and Redfin both estimate the average commission charged by brokers to be 5-6%.
That is much. Zillow reports that the average selling price of a U.S. home was just over $ 287,000 in May 2021.
A 6% commission on a home sold for $ 287,000 would be $ 17,220. Even after a 50/50 commission split, a realtor could make $ 8,610 on the home sale.
And at the high end of the market, the numbers must bring tears to even rich people's eyes. A homeowner who sold a mansion in Manhattan or Beverly Hills for $ 50 million would write (through those tears) $ 2.5 million or $ 3 million in commission checks.
But before you decide to embark on your new career as a broker, keep in mind that not every real estate professional works in New York or California, and not every real estate transaction is seven digits.
Who pays the broker's commission?
Here is some good news for homebuyers: The seller usually pays the brokerage commissions.
If you're selling, the news isn't great.
Smart buyers often have their own “buyer”. This can be great because it gives you a qualified professional (if you choose yours carefully) who is 100% by your side and who has skills, expertise and knowledge.
Usually sellers pay for their own agent as well as the buyer's agent.
Of course, one could argue that the seller pays commissions out of the buyer's money. The question "Who pays the total commission" can therefore be interpreted.
No matter how you look at it, buyers don't pay extra to hire their own agent. If you do not have a buyer's agent, the seller's agent will keep the entire commission without offering you a representation.
Also note that the average real estate agent charges “commissions” instead of “fees”. This means that they are paid based on success and not on the hours or work performed.
So if a deal doesn't go through, they are unlikely to make any money from it at all. This sometimes results in an agent getting lucky and making tons of money with a quick and easy transaction. But at least as often, he or she doesn't get a reward for hard work.
This is how the broker's commission is determined
Agent Kevin Deselms says the commission percentage is based on several factors. This can include local real estate market conditions.
“But the amount is often based on negotiations between the seller and the broker or the broker's mediation,” he says.
In other words, the commission is negotiable. And some agents are willing to offer discounts, either under the listing agreement or later.
In fact, about three out of five sellers receive a discount on their broker's commission.
"Commission rates have been falling in recent years," says real estate agent Matt Buttner.
“This is mainly due to the internet and the technology,” he says. “The MLS now automatically forwards the listing to real estate websites like Zillow and Realtor.com. The work of a listing agent is therefore easier. "
Discounts are given for many reasons.
“Suppose a customer sells one house and buys another through the same agent. In this case, the realtor is more likely to offer a discount, ”says real estate attorney and broker Bruce Ailion.
"Or say the property is in a hot market and at competitive prices," says Ailion. “Selling may take less work. That could lead to a discount. "
Dual agencies (when buyers and sellers use the same real estate agent)
Sometimes the buyer's agent and the seller's agent are the same person. In theory, it represents the interests of both sides equally.
This is known as a "double agency". A seller may be able to negotiate a reduced commission rate if one of these cases occurs.
However, dual agencies can create some obvious conflicts of interest. Some agents find it difficult to represent both parties fairly, especially during the negotiation of the deal and in the event of a dispute.
For this reason, agents in these situations are required by law to be completely transparent to both parties about their roles and actions. And that's why dual agencies are absolutely illegal in Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.
What do real estate agents and brokers do?
Whether on behalf of sellers or buyers, the duty of a real estate professional is to maximize the value that their customer will get from the home transaction.
Agents do this by:
An in-depth knowledge of the local housing market, including experience in valuation, Negotiating skills to get the best or optimal price for the client, Local contacts in the market that can help in the quick purchase or sale of a home, an in-depth knowledge of the legal and mortgage processes involved Troubleshooting that keep a transaction on track when problems arise Interpersonal skills that allow customers to feel comfortable and in control throughout the process
If you pick a good one, your agent can be very valuable.
Ideally, your broker has several years of experience in your local real estate market. But new agents can also offer many skills and insights.
Types of real estate agents
The terms "real estate agent", "broker" or "broker" may be used interchangeably. However, there are some key differences between these professionals.
Real estate agent vs. real estate agent
All brokers are real estate agents or brokers. But not all real estate agents or brokers are brokers.
Brokers are members of the National Association of Realtors (NAR). And the broker brand is supposed to prevent brokers who are not brokers from claiming so.
The NAR would have some reason to say that its members have more expertise (they have to take additional exams) and are subject to higher professional standards than other real estate agents.
Real estate agent vs. real estate agent
A real estate agent is someone who has passed their state's relevant exams and is approved as a real estate agent.
A real estate license is the lowest level of qualification for people to make buying and selling homes easier.
Each federal state defines its own examination standards and further training requirements. Some states make it easier to get a license than others.
A real estate agent went the extra mile and passed additional exams. So he or she should – theoretically – have more knowledge and expertise than an agent.
And a broker is more likely to have a senior position in a real estate agency and often manages the activities of other brokers.
The Bureau of Labor Statistics reports that the median national income for a real estate agent in 2020 was $ 51,220.
In contrast, the BLS also found that real estate agents tend to make about $ 10,000 more per year than sales agents.
Why a real estate agent is worth the commission
Having a real estate agent by your side as a buyer can make home shopping less stressful – and you can find better properties or get a better deal than you would have it on your own.
For sellers, it's a better way to list your home and attract more potential buyers.
And it is helpful for both sellers and buyers to have a professional by their side who can handle the complexities of such a large real estate transaction.
In addition, “buyers work a lot harder for their money,” says Buttner. “You often work with a specific buyer for months. You show them several houses and make lots of offers before something gets stuck. "
Because of this, the buyer's agent sometimes makes a little more than the seller's agent.
"Many brokers who charge less than 6% still offer the buyer's broker a full 3%," says Buttner.
Remember, an agent's hard work is not rewarded with every customer. The national average salary statistics collected by the BLS and other sources do not show this unpaid expense.
“Not all transactions result in a commission,” says Ailion. "So the costs associated with transactions that don't complete must be factored in to those that do."
Ailion understands that 6% may seem high. But, he adds, you really get what you pay for.
"Like a good doctor or lawyer, I believe that a good agent is worth his fee," says Ailion. “You are dealing with probably the most important asset in your life. So it makes sense to choose the best representation. "
Alternatives to using a real estate agent or broker
Many sellers consider brokerage commissions too high and try to avoid them.
There are three ways to sell a home without such a high cost:
For sale from the owner – Basically this could include putting up a yard sign, printing and handing out some flyers, and letting everyone you know know that your home is for sale. It's cheap and sometimes works, especially in hot real estate markets. But the risk of under- or over-valuation of your home is highFlat rate MLS registration by owner – The MLS is the multiple listing service. It is the online resource that real estate agents use to inform other agents and buyers that a home is available. Owners can add their listings (which can also appear on Realtor.com and Zillow) by paying a flat fee – or a smaller flat fee with a success fee on salesSlimmed down services – Some agents offer lower commissions for easier service. You may be presented with a menu – from MLS alone to the ever-expanding levels of service – that you can choose from, what you want and how much you're willing to pay
Are these better sales channels? It depends on many factors, including:
How strong your local real estate market is How well you can assess the value of your home How much effort are you willing to go to find a buyer How confident you are of seeing your sale through to completion
If you are sure you can handle all of these as well as an agent, feel free to sell without hiring one.
But for many people, working with a real estate agent, broker, or broker gives them the peace of mind that they are getting the best price for their home from the most qualified buyer.
Are you ready to sell your home or buy a new one?
Whether or not you choose a real estate agent, it is time to get serious about selling your home and buying a new home.
Prices are still low – this will keep buyers motivated and you can probably get affordable financing for your next seat.
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