It seems like everyone has a license to sell real estate these days. Realtors are like superheroes. They may be a teacher during the day and a real estate agent on nights and weekends. If you’ve ever thought about going into the real estate business, you’ve probably wondered how realtors are compensated for their work. Realtors are paid a commission or a percentage of the selling price. However, the commission is split is various ways. In this article, we’ll examine a few of these splits including a broker/agent split, 100% commission, and referral splits. http://www.erealestatepro.com/
First, some agents split the commission with a broker. The broker is the manager of a real estate office. Real estate agents work for these brokers. They may work in the office or from their own home, but they ultimately answer to the broker, who is in turn responsible for the service. The percentage of the split is determined by a couple of factors. While some brokers and agents split the percentage 50/50, others split it differently. The amount of the assistance provided by the broker and the amount of business brought in by the real estate agent are two factors that help establish the percentage of the split. An example of the broker/agent split is as follows: if the commission earned is $10,000, and the broker and agent agree to a 50/50 split, the real estate agent takes home $5,000.
Another compensation method is the case where 100% commission is paid to the agent. This method sounds pretty good, right? Well, often times, the agent pays a monthly fee to an office in order to have the office or company vouching for their name. Having an office or “brand name” backing the agent helps generate business for the agent. The monthly fee can be high, but agents are willing to pay the fee in order to collect the full commission. In this scenario, the costs are capped, but the earning potential and income has no limits. Generally, this method of compensation doesn’t work as well for new agents, as they can’t generate enough work worth the fee. For example, a seasoned agent may have to pay $1000 per month to an office, but if they make the $10,000 commission in that month, they are up $9,000 for the month. They take home $9,000 instead of the $5,000 they acquire in the broker/agent split. However, if they don’t make any sales in the month, they are down $1000 in this scenario. However, in the broker/agent split, this same new agent wouldn’t be out any money for not making a sale.
Finally, some agents are compensated based on referrals. In this scenario, an agent (Agent A) refers a seller or buyer to another agent (Agent B) in another state, for instance. Agent A may charge a 25% referral fee. If the sale happens for Agent B, and Agent B receives the $10,000 commission, Agent A would receive $2,500. Agent A’s referral fee comes right off the top of the commission. Agent B would then either split the difference with his broker (in the broker/agent split), or he would take 100% of the balance (after paying his monthly office fees), if this agent works under the 100% commission method of compensation.
As you can see, real estate agents are compensated for their efforts by receiving a percentage or commission of the selling price of the home. Three methods of compensation include the broker/agent split, the 100% commission, and the referral fee. When determining if the real estate business is for you, it is worth thoroughly investigating the compensation methods when determining which method provides the best fit for your individual needs.