If you were under the impressions that real estate agents receive salaries, SURPRISE. Real estate agents are actually paid as contract laborers which means we are paid a commission or service fee, per property once it is completed and closed. This is the most common way a Realtor gets paid for services.
To explain further, you can get paid 2 different ways. Typically, the Seller pays the commission for both the buyer and seller’s agent when the sale is completed is final and closes. The money comes to the brokerage you work for via the title company that closes and funds the transaction.
You may also be paid by the buyer client in the transaction if the seller does not decide to pay on behalf of the buyer and/or you may be paid by the buyer if you charge him a transaction fee, but it is always done through a title company or closing attorneys so that the passing of funds is all above board and legal. Buyers and sellers can never you pay you direct within a transaction. All fees for service that are due you, must come through your brokerage to stay compliant with state statues.
Once that commission check arrives to your brokerage, the broker fee or split with your brokerage is taken out first and then you receive the remainder of what is due you. Every brokerage has different splits and fees which is decided when you go to work for that brokerage. Broker splits can be on a sliding scale as well, depending on your volume of sales. This is something you want to understand when you choose a broker to work for.
So salaries for agents may be a “thing” in the future, but for right now, we typically get paid when the Seller or Buyer pays our brokerage for expediting and completing the sale of a home.
There are always exceptions to the rule and I know of only a few exceptions to the idea of salaried agents, and that would be with a builder/developers who own their own real estate companies and who would hire an agent to sit on his/her new homes subdivisions for instance. These builders could typically pay that agent a salary for the hours they work doing open houses and signing up buyers to purchase the homes in the subdivision.
My research has shown that in most cases the salary would not compare to an independent agent’s potential commissions. The salaried agent would in most cases be beholden to the builder in their daily activities, just like an employee would be beholden to a company that employed them for a set amount of money paid for a set amount of hours for a particular job description.
It is very possible for the agent to make decent money while the subdivision is active, but once it sold out, they would have to start over again finding new business unless the builder/developer started a new subdivision. All this is based on a case by case situation with certain builder/developers. Most of them do not want to mess with the duties and legalities of running a real estate brokerage as well as a building and developing company. They will hire an independent real estate brokerage to do the job of showing and selling their properties and taking on the states compliance and legal ramifications.
Again, it is rare to see these types of employee-like salaried positions situations in the real estate world.
Knowing what I know to be true with commission sales, through experience of over 26 years, the opportunities as an independent agent would offer a much broader opportunity for advancement in sales transactions and a lot more money for the majority of people.
Commission sales have infinite possibilities as long as you want to work. If you understand this and are willing to put in the time and effort, the aspect of being a salaried employee would be very limiting to you. The opportunities for an independent agent far outweigh any salaried agent in my opinion.
Did you know that sales jobs are the highest paid positions in any industry? Research for yourself and you will find that commissioned sales people are the highest paid people at most companies other than perhaps the CEO. Why? Because they bring customers and business into the company. Without a sales force there would be no customers, thus no continual business for any company. Sales people are always gravely needed to procure customers and sell those customers the companies particular product or service.
With regard to Real Estate, we too are companies, in that we each own and operate our own small business within the brokerage we affiliate with . We may start out small but we can grow very large and rather quickly depending on how fast we employee smart systems and techniques that highly encourage folks to work with us and how many employees or team members we add to our “companies”. That one component, adding team members can exponentially grow our business if done in the right way. This is why you see so many successful agents that own local and expansion teams around the country. It is an awesome way to grow business quickly.
So now you can see how being an independent agent/producer can afford you the opportunity to own and grow a large business that you control and can grow through your efforts and consistent activities, as well as sell when you decide to retire or quit.
Here’s another tidbit you might not have thought about.
As a commissioned agent, you can work as hard as you desire. You can spend every waking hour hitting the pavement, looking for customers, building relationships, getting involved in community events, meeting new people and prospects.
You can advertise on Facebook, do videos, send out email blasts, develop marketing campaigns to procure more clients, advertise on billboards and anything you can think of (legal of course) to attract people to you so that you can help them buy and sell homes. This will result in making just as much money as you are able and willing to work hard to get.
Personally, I love having that ability and the flexibility to call my own shots when it comes to going out and getting business. I have the opportunity to work as hard as I want without being an employee and being told I have to put in a certain amount of hours and will receive a certain amount of pay. As a salaried agent, that opportunity most likely would never materialize. How do you effectively work to get other clients and sales if you are too busy sitting all day at a subdivision waiting for a customer to come in and then only getting paid for the hours spent there. You would not have the freedom to go on appointments at a moment’s notice when potential buyers and sellers need your services.
One last thing to inform you about when you hire on as an independent agent with a brokerage. You are never an employee of the any brokerage. You are a 1099 contractor. The brokerage does not withhold taxes and so you are on your own to save back money to pay taxes at the end of the year. So be sure to have a carefully planned out budget to keep you on track and cash flowing when the real estate market ebbs and flows, as it always does!