How is a Realtor Paid?

Posted on January 14, 2010 by Connie Miller 
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Getting the most out of your Realtor might be as easy as understanding how Realtors are paid.  The majority of realtors are self-employed individuals who are on 100% commission.   They work hard and don’t make a cent until you close escrow on your house.  They typically pay all of their own advertising and overhead expenses and give a percentage of their earnings, based on volume sold, to the brokerage they hang their license with.  If you are working with one Realtor from a given brokerage and then switch to another Realtor within the same brokerage, that first realtor makes nothing.  It does not matter that they have the same logo on their business card.  They are self-employed.

It is common for buyers to go through a process before they actually figure out what they really want to buy.  The best realtors work as hard for you as you are loyal to them.  If you are playing several realtors simultaneously, the odds of their hard work paying off are diminished by the number of realtors you call.  If you show your loyalty to a realtor, they will reward you with theirs and put you first. 

Some buyers think they can get the best deal if they work directly with the listing agent and that they don’t need representation.  That is not my experience.  The sellers in the sale of a house pay the commission.  Usually half of that goes to the realtor representing the seller, the other half, to the realtor representing the buyer.  Typically, this is 3% for each side.  Buyers who employ this tactic feel that they can get the listing agent to discount their commissions since they would make commissions on both sides of the transaction and have commissions to give away.  I would caution a buyer against this unless there is incredible goodwill on each side and the paperwork is more of a formality.  But typically, there are price negotiations and repairs that need to be negotiated.  Why would a listing agent favor a buyer in any negotiation?  You might get one percent of the purchase price in commissions back if you are lucky, but you have no one looking out for you in the process.  Why risk one of the most important purchases of your life to one percent of the purchase price?  It makes no sense.  You need someone looking out for you and no one else.  Get your own buyer’s agent.

Interview a few realtors.  Pick one whose communication style matches yours.  Do they keep the hours you do?  Are they proficient in email and texting like you might be?  What response time do you expect?  Find someone who is knowledgeable about the area(s) you are interested in.  For example, if you are looking for a Los Altos Realtor, find someone who lives there.  Their office might not necessarily be there but they have to be able to articulate all the details of why certain areas are better than others.  If the agent you start with is not working out for you, be fair and tell this to the realtor before you begin the dance with another one.

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