Some people live their entire life without ever buying a home. Most people who buy real estate only buy one or two homes in their entire life. I sometimes lose touch with that until I meet someone that I have to explain what a Realtor is and what a real estate agent does. Did you know that Realtor is not a job or occupation? Realtor is what we call people who belong to the National Association of Realtors. We Pay dues to belong and while membership is not mandatory it is almost impossible to sell real estate without being a member.
Buyers will ask me how I get paid or who pays me. Some think that real estate companies pay agents. Most agents are independent contractors that work on a 100% commission basis. Real estate agents need to work through a real estate broker and that is the purpose of a real estate company. The agent gives the real estate company a percentage of each commission.
It is the seller that pays us, it is called “broker reciprocity” and we get paid through the sellers broker. When an agent lists a home the seller agrees to pay a commission. Some of that commission goes to the agent the seller hires and some of it will go to a buyers agent. Either way we generally don’t need to charge a buyer directly. Commissions are not due until the home is sold and the sale closes. Agents work for free up to the closing and then we get paid. The check goes to the real estate brokerage and the big brokerages will take up to half of it and then cut the agent a check for the rest.
Home buyers and sellers often believe that real estate companies sell real estate. They really don’t ans to go one step further in most cases the agent is paying for everything including the sign with the big company logo on it. The real estate company that has the most sales is the company with the most agents.
It is a good system and a bad system. The national association of Realtors does a survey every year and according to the 2010 survey median gross income for Realtors in 2010 was $34,100. The typical Realtor is a 56 year old white female who attended college and is a home owner. In advertising the agent is almost always represented by a photo of a young man in a shirt and tie or a young woman in a short dress. The NAR is doing everything they can to attract younger members but the average age is going up instead of down.
Did you know that a real estate agent that has never sold a home will charge as much as an agent who has sold many homes? That means that if you get your real estate license this week you can charge as much as the most experienced agent in town.
Photo: NAR building in DC