The In’s and Out’s of my Professional Fee

Many people are confused about how Real Estate Agents are paid and usually misinformed as well by those in the public arena who have never been Realtors®. We are paid a professional fee, which is based on the negotiated selling price of many types of real estate. Here are some in’s and out’s you might not be aware of.

  • Agents are independent contractors, not employees.We don’t get to pick up a paycheck every Friday as most people do. Our checks only come when we successfully close a sale transaction. In addition, as independent contractors, each agent must pay additional social security taxes, medical insurance, errors and omissions insurance, higher premium car insurance, license fees, continuing education expenses, access fees for MLS, as well as our own business expenses – Broker dues, Realtor dues, office space, phone service, real estate signs, lockboxes, gas, marketing materials, home brochures, virtual tours, photography, computers, faxes, printers, website, and much more! (I can easily spend $20,000+ a year on the before mentioned items.)
  • Our pay is contingent on one thing – a closing. Unlike almost every employed person who is guaranteed a paycheck no matter what their job performance, our paycheck only happens if we close the deal and ownership transfer hands. So, if a buyer’s financing falls through at the last minute, a title problem arises, or any party backs out resulting in the sale not closing, we are not paid… period. We are also out all the money we have put into marketing the property, not to mention the many hours of work spent with our clients and away from our families. For this reason, real estate agents are always invested in your success. We have bills to pay just like you.
  • That professional fee does not belong to us. It belongs to our Broker, the person we “hang” our license with. But did you know the total compensation is shared by a number of people? First, the listing broker gets paid – that’s the company with whom the home is listed and with whom the listing agent is affiliated. If the buyer is represented, the Listing Broker pays a ‘co-broker’ commission to the Buyer’s Broker. Each Broker, the Listing Broker and the Buyer’s Broker, pay their agents a share. By the time all these ‘splits’ are done, your agent will typically receive only 20-25% of the total professional fee paid by the seller.