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How do Real Estate Agents Get Paid?

This is a relatively common question, especially for first-time buyers that we work with here in Austin.There's a very quick answer to this, but sometimes there are underlying questions as well, so I'll try to address this as clearly and thoroughly as I can.


If you're selling your home, you will be paying both your own agent and the buyer's agent, with rare exceptions. As Realtors, we are not allowed to tell you that any amount of commission is customary or standard, because it's considered a violation of anti-trust laws. I can tell you that our brokerage charges 6% to list a home, and 3% of that goes to the buyer's agent, if any.  


If you're buying a resale home, the commission will be paid by the seller, so you are not responsible for paying your agent. Again, there are exceptions to this rule, and some agents and brokers require you to sign a buyer's agency agreement which could obligate you to pay them under certain circumstances. I can't cover all of that here, so suffice it to say that the seller pays your agent at closing, barring something unusual. With that in mind, there is almost no reason to forgo having an agent help you find the right home. If you go directly to the listing agent, they are not under any obligation to give you a discount if you represent yourself. Though they will probably treat you fairly (our code of ethics requires this), it's not generally wise to go it alone.


If you're buying a brand-new home, the commission will be paid by the builder. Keep in mind that the pricing you see already includes our commission, so you won't pay anything additional if you have an agent representing you on your purchase. Reputable builders in Austin won't give you a discount on the price if you have no agent, and the salespeople working at model homes work for the builder, not you. Again, they will probably treat you fairly, but it's good to have someone in your corner if things go awry for any reason. Better safe than sorry, right? I have told many buyers over the years that even if they don't work with us, I would highly recommend having an agent help when dealing with a builder. They might help you to avoid problems during the process.


As part of the original question as posed ("how do agents get paid?"), there are a few other items which bear stating here:


1. We only get paid when we sell a home. Our commission is received after closing, not at the time of the contract, so the lag time is often 30-45 days from the contract until our paycheck.


2. We are not on salary, so if we're looking at homes, we're not getting paid for that time, unless you purchase something and close on it. I've had buyers who have asked our agents to see property who seem to think that they get paid regardless of whether they purchase something. Instead, we try to pre-qualify our clients and then prioritize our time so that we're more productive. It's a form of triage, and there are a few litmus tests ("Is this person sincere and qualified?" "Can we find what they're looking for?").


3. I am a broker and owner of our company, so my pay is different from many agents you will encounter.Typically, an agent doesn't receive the entire commission.Using our 3% example from above (again, not "standard"), if you purchase a home for $200,000, the gross commission due to your agent is $6,000. Of that amount, they will pay a percentage to their broker, sometimes as high as 40-50%. Since they obviously end up spending some portion of their time and gas with clients who end up unable or unwilling to buy anything, this is something to consider. Although it can be a very lucrative business, this isn't always the case. Frankly, it's not as easy as it looks. :)  


If you're considering buying or selling a home in the general Austin, Texas metro area, I would love the chance to help. Feel free to call, email, or text me anytime. My cell number is 512-796-7653 and my email isjason@austintexashomes.com. Thanks!  


Image credit:http://www.flickr.com/photos/narinfocentral/

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