Real Estate Agent: How the Commission is Divided? By Andrew Stratton At Isnare.com Ezine Articles

You may have dealt with a lot of estate agents but did you wonder how your real estate agent gets paid? You surely know of that all the talk about commission, percentages, fees, closing costs etc. are broken down at closing. But, what are his actual earnings? The fact is thatyou are not the one who is paying your agent a commission. It is the licensed broker pays your agent as he is the one who can get paid a commission.

It is interesting to know that the the guy who slogged so hard to trade or find your house is not getting as much as you believe. Ever wondered how the money makes it to your representative? Here are a few ways:

The fact is that the real estate agent you are interacting with either works for a brokerage house or an established licensed broker. Whether it is buying or selling the agent brings a client to the table, and an agreement is signed between the brokerage house and the client.

When the discussion is materialized into a sale, the broker gets an average of 6% of the sale price as a commission. It may not always be an extact split but it is often close to half that goes to the broker who represents the seller and the buyer.

The commission is then divided up between the houses, and after that the brokers decide how much to pass on to the agent who really did the all leg work. Various factors are taken into consideration while finalizing the amount. The total experience he has in this field or in that market, the time the agent has spent with the company and the level of his productivity decide the amount he gets.

For instance an inexperienced representative may only get thirty percent of the cut where as a veteran who brings in loads of business, could get half or even more of the proceeds.

There is another method too. Here the agent can get the entire commission provided he pays charges per month to the brokerage house. You can consider this a kind of a fees or a rent for using the office and using the name of the organisation to back his reputation.

Some representatives find this deal very advantageous because no matter how much they make at the end of the month the amount they have to pay remains fixed. But the representatives who are new to the business may not have a good client list and hence may not get the benefit of word-of-mouth. For such brand new agents, the traditional split is more preferable as they may not be capable enough to make that fixed payment per month.

Also there are some factors that gobble the ultimate profit made by the brokerage house and the representative. In case the brokerage house is a franchise, after every commission there is a charge fee that must be paid. In some cases referrals come into the picture too where the brokerage house sends a client to you, they can ask for a referral fee.

And then a certain percentage that comes out of the commission which is typically paid by the seller at closing. However, this is can be negotiable depending on the kind of market. Another point open to discussion is how the commission can be divided. So, as you can see, it is not just the 6 per cent but a lot more things that count. Your agent gets the money only after everyone else gets the money.

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