March 4, 2021
3 MINUTE READ
If you’re in the market to buy or sell a home, chances are you will work with a real estate agent to help guide you through the process. The National Association of Realtors reports that nearly 90 percent of buyers purchased their home through a real estate agent in recent years, a figure that has been growing steadily from just 69 percent in 2001.
The overwhelming majority of sellers also relied on the help of a real estate agent to sell their home, with less than 10 percent of sellers opting to attempt the sale on their own. But, how do real estate agent compensation structures work?
If you’ve never worked with a real estate agent, or if you’re not a real estate professional yourself, you may be somewhat unfamiliar with how agents are typically paid. With this in mind, let’s take a closer look at 3 traditional real estate agent compensation structures.
The majority of real estate agents are compensated under this model through a broker, who shares the gross commission amount that is collected by the broker. For instance, let’s say that the total gross commission of a transaction is $20,000. The broker and agent split this commission 50/50 — meaning that $10,000 goes to the broker and $10,000 goes to the agent. Of course, the percentages may vary.
The percentage split is agreed upon in advance by the agent and the broker and is usually a direct reflection of the level of support and services that the broker provides. It can also reflect the volume of business that is brought in by the agent; typically, agents who are highly productive can negotiate better splits.
In this structure, the agent gets the entire position. This model is typically used when the agent is paying a desk fee or another monthly office fee. These fees can be a significant amount each month, but top agents tend to prefer it because while their costs are capped, their income potential is not.
Typically, new agents are not as interested in this type of model because of the fixed costs they must pay each month. In the beginning stages of their careers, most agents don’t have a good idea of what their commission income will be, which can make this particular commission structure too stressful.
Some of the larger real estate franchises charge an “off the top” percentage fee of each commission to their franchise brokerages. This fee comes off of the commission before the broker receives it and then splits it with the agent.
Assuming a $12,000 gross commission and a 7 percent franchise fee, let’s take a closer look at how this would work. The $12,000 commission would pay the franchise fee of $840, while the broker and the agent would then split the remaining $11,160.
Reali agents are employees, rather than independent agents. This gives them the freedom to make all decisions with your best interest at heart since there is no financial gain to be had from you paying more for a home.
At Reali, everything we do is focused on the customer and we’re a team backed by technology, allowing us to offer a better and more efficient experience. We like to think of it as the future of real estate, here today.
Interested in learning more about real estate agent compensation or how to buy and sell a house? Contact us today. We’d love to talk to you.