How Much Commission can You Earn as a Real Estate Agent
By Sadiya Anjum
A real estate agent’s commission is calculated as a percentage of the sale price of the property sold. There is no fixed percentage that applies as commission – the number varies from one transaction to another, one agency to another, and is even dependent on region. As a real estate agent, the first rule you must understand about your earnings (commission) is that it is negotiable.
You can have your own set of rules deciding your percentage. However there are limits placed by the law and regulatory boards that prohibit you from overcharging. An agent’s commission paid by the seller is generally contingent on the sale of the property. The commission is agreed upon in the listing agreement that the seller will sign. After the seller accepts an offer, the selling agent and the listing agent may decide upon the commission split between them.
The norm for agencies is to set a minimum and maximum limit for commission percentage. This allows room for negotiation with the seller. During negotiation, any dip below the minimum limit will have to be verified with the broker or agency. Sometimes if you sell a home in a matter of few days then the seller may ask you to reduce your commission. Likewise an unusually drawn out sale period may justify your request for a higher percentage. But all this is negotiable and depends on the situation, the agency and the seller.
Your commission earned as a listing agent goes to several parties – you, the selling agent, the selling agency and the listing agency. If either of the agencies are a part of a franchise (eg. Century 21Â®), then the agency will have to share the commission with it too. The agencies are paid for the office space and other resources (like advertising, marketing etc.) that they provide.
Even though people harp about the big fat percentage cut that agent’s get, it really is not that big or fat. But some agents have the potential to increase the percentage they receive from the agency. As you close more sales and establish credibility, the agency may give you a higher cut. If you manage an in-house sale, again you may stand to gain more as your agency does not have to share the commission with another agency. An in-house sale is when the listing and the selling agents are a part of the same agency.
If you manage to list as well as find a buyer on your own, you can again hope for a high percentage. This is a double-end transaction where you play both the listing and selling agent. Here the agency will have to give only you a percentage, hence you stand a better chance of more money.
Some agents are a part of the agency simply to have access to certain resources and the use of office space. You run your own show but pay a monthly fee to the agency. This means you are not required to share your commission with the brokerage. But this strategy works only for those who are seasoned professionals who manage to close properties regularly. The monthly fee you pay can be a hefty one and you should be able to generate enough business to be able to afford it.
Another factor to remember is that commercial properties and land generally fetches a higher commission than residential properties. But commission percentage is negotiable – you can always charge less or more depending on the particular transaction and your needs. For instance you may compromise with a lower percentage if the seller promises more business in the future, i.e. he buys a home through you.
As with any line of work, the smarter and harder you work the more money you can earn. Generate more business and you will be assured of more money. Even your agency may increase your cut depending on how well you perform.
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