Austin Texas Team Real Estate Blog

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"How do Realtors Get Paid?" - Ask the Broker

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, or visit our website at www.austintexashomes.com for more information. My cell number is 512-796-7653 and my email is jason@austintexashomes.com. Thanks!

 

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

 

If you're looking for a home in the Austin area, you can also visit my primary website at www.austintexashomes.com.  Thanks!

Comment balloon 11 commentsJason Crouch • January 09 2014 10:45AM

Comments

Few folks realize that the agent that is representing them does not get to keep all of the money... Good question and great answer...

Posted by Beth and Richard Witt, Long Island Cash Home Buyer 516-330-6940 (Long Island Cash Home Buyer) almost 5 years ago

Right you are. Thanks for stopping by!

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) almost 5 years ago

Jason, excellent explanation of how we get paid! At some point very early in our relationship with buyers, we take the time to explain how we get paid. For the most part, the public has no idea! They usually presume we are paid by the broker to "take people out".

Posted by Tom White, Franklin Homes Realty LLC, Franklin TN (Franklin Homes Realty LLC (615) 495-0752 or www.FranklinHomesRealty.com) almost 5 years ago

TOM - Thanks! I thought this one was worthy of explaining properly.  :)

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) almost 5 years ago

Jason - GREAT explanation about how we get paid...so many folks out there have no idea!

Posted by Jeff Stevens, Jeff Stevens REALTOR®/Associate Broker (Berkshire Hathaway HomeServices New Mexico Properties) almost 5 years ago

Great post to explain the process at your firm to buyers and sellers.  

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) almost 5 years ago

Hi Jason, I get this question all the time from our First Time Home buyers. You've done an excellent job explaining it. We do have to watch out for those "Window Shoppers", who are not serious, but enjoy just looking at homes.

Posted by Jerry Newman, Texas REALTOR, San Antonio Military Relocation (Brown Realty, 210-789-4216,www.JeremiahNewman.com) almost 5 years ago

Very complete answer Jason and makes it easy for a buyer and seller to understand how it works. There are guarantees that we will see a paycheck when we start working with the clients. 

Posted by Debbie Reynolds, Your Dedicated Clarksville TN Real Estate Agent (Platinum Properties) almost 5 years ago

Hey Jason,

Excellent post explaining how agents and brokers get paid.  Best of GREAT success to you in 2014!

Posted by Jordon Wheeler, J W Group Real Estate Sales and Service (The Jordon Wheeler Group) almost 5 years ago

JEFFREY - Thanks very much. I got this question as a suggestion from a friend on Facebook.

TAMMY - Thank you!

JERRY - Right you are. I really try to prioritize my time with clients and potential clients the best that I can.

DEBBIE - Indeed. I wanted to make that part very clear.  :)

JORDON - Thank you, sir!

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) almost 5 years ago

Jason:

Great line: We only get paid when we sell the home. Have a wonderul weekend. 

Posted by Alan Kirkpatrick, Alan in Austin (Austin Texas Homes) almost 5 years ago

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