Income in the real estate industry is nothing like a salaried position. As you enter your career as a real estate agent, you’ll quickly realize bi-monthly paychecks are a thing of the past. So, how does a real estate agent get paid?
The answer is commission. For each sale you make as a buyer or listing agent you’ll earn a commission. It’s typically a small portion of the sales price, however, a commission can also be a flat rate. There may also be a monetary bonus for the buyer agent, but payment still hinges on the close.
Who Pays Commission
The seller typically pays 6% of the sales price for realtor services. The listing agent gets 3% and the buyer agent gets the other 3%. However, it should be noted that sellers don’t pay agents directly since it’s prohibited. Instead, the commission payment is sent to the agent’s broker.
Broker Commission Split
When you sign on with a broker, one of the key considerations is the commission split. In return for operating legally under the brokerage, agents much give a portion of each commission to the broker. This comes right off the top once the commission fee is received. So, let’s say you have a 70/30 commission split, which is fairly standard. That means if the total commission is $5,000, then $1,500 will be taken out automatically by the broker.
When Commission is Paid
Instead of getting paid for the hours that you put in as you work with a seller or buyer, you’ll get one fat commission paycheck at settlement. As soon as the close and funding are completed the commission fees will be released. Today’s real estate agents are lucky that direct deposit allows for immediate payment. Just keep in mind it could take time to close your first deal.
How the Payment Process Works
Below is a quick rundown to give you a better idea of how the payment process works.
- Closing - This may be the last hoop to jump through, but there could be a snag. All the documents must be signed and the funding from the buyer must go through.
- Once funding is dispersed by the bank and the sale closes, the commission fee will be taken out of the seller’s proceeds.
- The escrow company sends the commission fee to the brokers.
- Once your broker receives the commission, they will deposit the money and then cut you a check or direct deposit your portion.
You can’t cash your first commission check until you take the required real estate courses. Get started now and you’ll be one step closer to being a paid real estate agent.