How to Pay the Real Estate Agent

When it comes to buying and selling homes, the real estate commission is one of the biggest fees that is paid. Real estate agents work hard to sell your home, and a 5 percent commission on the sale price of your home is not a small amount. However, you may be wondering how exactly that commission is calculated, and how it is distributed to each agent involved in the transaction.

Here’s how it works. Real estate agents are usually paid on a commission basis, and their rates are set out in an agreement between them and you (or your broker). Normally the listing agent and the buyer’s agent receive the same rate. In this article we will use a fictional sales price of $200,000 to illustrate how this works, but the process is the same for higher or lower prices.

The total sales commission is calculated by multiplying the listing price by the percentage of the commission rate, and then adding in the buyer’s agent’s fee. Then the final number is divided by four, which is how much each agent will get paid at closing. This number is then transferred to the brokerage firm, and the brokers then distribute their share among their agents.

If you are a buyer’s agent, you will also need to negotiate the split with your broker, and oftentimes you will be able to get a better deal than what is offered to you as a client. Once the sale closes, and all the documents are signed and the funds are exchanged, the escrow company or title company handling the sale will cut checks to each of the brokerage firms and their agents. Read more

As you can see, there is a lot of paperwork and money going around in a real estate transaction, and even if it goes perfectly smoothly, it’s not uncommon to have some sort of issue come up. These issues can require a great deal of time and energy to resolve, and oftentimes the real estate agents are working on straight commission.

In addition to the actual commission, real estate agents also have a host of business expenses they need to pay for out of pocket. These can include license and insurance fees, advertising, marketing and other costs associated with running a business. If you’re interested in learning more about becoming a New York real estate agent, click here to find out how to get started! Click here

When you’re ready to make the leap, contact us here at the New York School of Real Estate! We will help you become a licensed real estate agent and be well on your way to making those big real estate commissions. We look forward to working with you!