How to Pay the Real Estate Agent

If you’re thinking of becoming a real estate agent in New York City, or if you’re already a part-time agent, one of the things you’ll have to think about is how to pay your bills. Like most jobs, the majority of real estate agents are paid through commissions, which is based on the sale price of the property you sell. In the vast majority of cases, these commissions are paid by the sellers of the home. They’re based on percentages, which is why higher sales prices tend to yield higher commission payments.

But how are these commissions actually paid? The answer to this question is a bit complicated. Unlike salary-based jobs, which usually come with an established base rate, commission-based careers are generally subject to market conditions, and therefore can change dramatically. As a result, if you are in an overcrowded real estate market with many properties available and few buyers, the average real estate commission may be significantly less than what it would be in a more competitive market.

Depending on the state in which you live, the standard commission rate for listing agents and buyer’s agents is around 5 to 6% of a home’s sale price. The total amount of this commission is paid by the seller using funds from the sale, and is then split between the agents. However, these agents don’t actually receive their share of the commission until the house closes. When that happens, the title or escrow company handling the sale will cut checks to all the brokers involved in the transaction (including the agents’) for their share of the commission. Also read

The problem is that this process can take weeks or even months, during which time the agent will likely be spending a considerable amount of their own money on business-related expenses, such as gas, cell phone, signs, and insurance. In addition, if the sale falls through or the seller decides to withdraw the property from the marketplace, the agent will have invested a great deal of their own money without having earned any income.

This is a major reason why the industry has so many agents working part-time, and why it can be difficult for a new real estate agent to break into the profession. For this reason, many agents, particularly those who work with buyer’s agents, will offer to split the standard commission with their clients. This can help to offset the sunk costs of the agent’s work, and make the job more attractive to potential agents. More info

Of course, if you are the seller in a competitive market and are willing to offer an incentive, this can be a good way to attract buyers. You’ll need to weigh this option carefully, of course, as it can often make a significant difference in the final sales price. Additionally, there are services which screen agents who are willing to accept a lower commission and match them with prospective clients. However, these are not a substitute for a full-service agent who will help you determine an asking price, negotiate with the seller on your behalf, and move the transaction to closing.