Getting Paid and Money Management Tips for Real Estate Agents
Are you considering getting into the field of real estate? Some newly licensed agents come into the business with the misconception that the minute your offer gets accepted, you get a big fat paycheck… WRONG! It can be 30-45 days after acceptance of the offer until you receive the commission check. The commission comes after the close of escrow, and is paid through the escrow company. Both the listing agent and the selling agent are paid from the seller, as agreed in the residential purchase agreement. On average the commissions are 5-6 percent of the selling price, which is usually split evenly between the listing and selling agent. However, sometimes the split is different and the listing agent or selling agent may be taking home more, which is all specified in the contract. After all contingencies have been lifted and escrow has been closed, the escrow company will send the agents check to their office. Another misconception is that all agents receive 100% of their commissions all the time. WRONG again! Most agents, working in a real estate company, are put on a commission split. Most splits are somewhere along the lines of 70% to the agent 30% to the company. Most companies also have a cap that once the agent has paid a certain amount of the money to the company within their working year (that starts the day they joined the company and resets every year on that date); they get to keep 100% of their commissions. For example, at the real estate company I am working at, once you have paid $23,000 in commission dollars to the company, you are considered at full cap. This means you get to keep 100% of your commissions. However, there are also other factors that come into play. If a client was referred to an agent by another agent, that agent may be entitled to a referral fees. There is no set limit for referral fees, but is typically 15%-20% of the commission. Also, if the agent is under some sort of mentorship, they may be paying their mentor part of their commission. Transaction coordination fees can be taken out the agent’s commission, or if written into the contract can be paid by the buyer or seller. If an agent uses a showing agent, that agent may be entitled to part of the commission, which is decided by the agent and their showing agent. So, when selling your house, do not think that because an agent is asking for a 6% commission, that they are just getting a lot of free money. There are a lot of people that get a piece of that commission. When starting out in real estate it is very important to budget your money. Since you may not have a lot of clients, it may be better to distribute flyers and door knock yourself, instead of spending money on mailing flyers out. Once you have a deal or two underneath your belt, then you should consider spending the money to mail flyers to create more time for yourself to handle buyers and sellers. You will also need to budget for Errors and Omissions Insurance. Most offices charge it as a monthly fee that they in turn cover you for any errors or law suits that may come in regarding your transactions. On average this can cost $120 a month or approximately $1440 a year. There may also be additional office charges for website maintenance, office space use, printing etc. There are some companies that will let you pay your Errors and Omissions insurance per transaction. Each office has its own individual way of handling insurances. You will also need to budget for marketing materials such as business cards, flyers, campaigns, open house supplies and gas (when you are showing homes to clients in areas far from your office). It is important to know these fees and costs before joining a company, as it may take a few months to get your business really up and running. So to all you new agents… Good Luck and Happy Selling!