How are real estate agents paid, and what is a Realtor?

Provided By The Cap Times

Real estate agents work for a real estate broker, with all commissions from a sale passing through the broker.

The most common type of listing agreement between a seller and real estate agent gives the agent’s broker the right to exclusively market the home. In return for finding a buyer, the seller agrees to pay a commission to the broker.

Typically, this commission comes right off the top as a percentage of the sales price — historically 7 percent but always negotiable — and is shared between the listing broker and the broker who locates a buyer.

New agents might receive as little as 30 percent to 40 percent of the total commission received by the brokerage. From that amount, other fees may be deducted such as advertising, sign rentals or office expenses.

Top producing agents might receive 100 percent of the commission and pay the broker a desk fee. Everybody else falls somewhere in between.

When more than one broker is involved, the commission is split between the buyer and seller sides. It’s not always 50-50 and can vary based on the type of listing agreement signed by the seller.

In a buyer’s market, sellers might consider asking their broker to give a larger percentage to the buyer’s broker. In a seller’s market, the buyer’s broker might receive less since there are so many people looking for homes. But there is no set formula.

Sometimes a buyer will sign an agreement with a broker to find them a house. In those cases, the fee paid to the broker is most commonly paid by the seller.

A “Realtor” refers to a member of the National Association of Realtors, a trade group.

When agents become Realtors they must agree to conduct their business in a way that adheres to the NAR’s Code of Ethics. The code covers ethical requirements that deal with all aspects of the profession, from working with consumers and fellow agents to writing truthful advertising.

Local groups of agents who have banded together in order to share listings more effectively are called Multiple Listing Services or “MLS.” Most of those groups are affiliated with their state and national Realtor associations and typically require all MLS agents to become members of both of those groups.

Agents pay dues to their state and local Realtor organizations. They also pay fees to become and maintain members of their local MLS.

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