Home > Real Estate Stuff Consumers Should Know > How Real Estate Agents Get Paid

There are too many confusions on how realtors get paid in the public's eye. Thus, I feel the need to educate consumers on this issue. Real estate agents, mortgage brokers and title companies are paid only when the property a buyer purchases closes and funds. If there is a stall in the middle of this process, none of us get paid. Thus, please do not get upset if the real estate agents feel the need to "pre-qualify" our clients.

Some real estate agents require a signed buyer's representation agreement with the client. Signing this paperwork means the buyer client gives exclusivity to this real estate agent to work solely with him or her to find their next property. Some realtors may not require this paperwork. But a good agent would at least mention this and educate the buyers on how he/ she gets paid. I do not require this contract be signed before my clients and I get to know each other. However, I would ask for a verbal commitment and when I do receive it, I would work on a trust and honor system.

I would also explain that if along the way, our relationship do not go in the direction we intend for it to head, we can terminate the relationship with a termination form.

Also, real estate agents are independent contractors of the business name they are associated with. 99% of the agents are not employees. For example, Re/Max, Keller Williams and Century 21 agents pay a fee to be associated with the real estate companies. Re/Max, Keller Williams or Century 21 do not provide cars, computers and gas allowances for the agents. All these are business expenses out of the agent's bottom line.

Thus, for these reasons, real estate agents really do want a commitment either on paper or verbally (works with some) to work on an exclusivity relationship. Should the buyer uses one agent to view the property and another agent to write the contract, many confusions and commission dispute will arise. Thus to minimize this issue, again, the importance of working with the agent exclusively is only fair since the agent would be forking out the car, the gas, the time and efforts in working with the buyer clients.

Note: Definition of "Exclusivity": Contract term in which one party grants another party sole rights with regard to a particular business function.

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