How Do Real Estate Agents Get Paid?

This is an excellent question, because time and again, I see misunderstandings between agents & the public. It is a difficult subject for many agents to bring up & many agents have forgotten that everyone doesn't know how this works. An example of this is as follows: An agent is "on the floor" or on "phones".  This means that it is their turn to answer the phones in hopes of getting a client. They are not paid for this. Someone calls about a property the company has advertised in order to make the phones ring. They would like to see it. The agent begins to question them about their income or whether they've spoken to a lender.  The caller gets offended and tells the agent that they simply want to see the property. When the agent refuses to show the property without getting answers to their questions about whether the caller can afford to purchase the property, the caller hangs up & wonders why that agent was so rude.  After all, aren't they paid to show property?  Isn't that
"their job?"  Meanwhile, the agent exclaims "who do they think I am-a free taxi service?"
..

 
.What just happened?  It was simply a lack of communication. Here's how it works: Real Estate Sales people work on 100% commission. They are like independent contractors. When a home is for sale, a seller lists it with an agent called the "listing agent".  They sign a contract with the listing agent stating that if the home sells within the contracted time, the seller will pay a specific commission which they have negotiated with the agent.

The listing agent puts the home on the Multiple Listing Service, (MLS), and offers a portion of that commission, usually half, to the "selling agent" for finding and representing a buyer. Both agents will be splitting their portion of the commission with their companies & franchises. 

New agents quickly learn that it is a long perilous path to a paycheck, with lots of bills and expenses along the way . They also learn that 10% of the Realtors are doing 90% of the business. The rest are starving, and the public opinion is that Realtors are rich.

All the agents use the same MLS. There  aren't any special databases for different agents-they all have the same MLS for any given region.  That means that jumping from agent to agent won't necessarily get you more properties to choose from, because they all pull from the same pool. Since you are reading this, you already have access to all the homes currently for sale on the MLS: click here to see.
  This offered commission is received only by the agent who writes up the offer for the buyer, and only if & when the sale is consummated. If the sale fails to be completed, no commission is paid & the agents receive nothing for that transaction or any work done for the client.

When an offer is made on a property, it is necessary to present a letter from a lender stating that the buyer is qualified to get a loan for the amount needed to purchase the home.

It doesn't take long for an agent  to figure out (after a few go arounds)  that it is an exercise in futility to drive around showing  homes to potential buyers until the buyers qualifications are checked and a price range has been established. It is also hard to come up with gas money if they continue this practice.. 

Another downfall of this is that when people begin looking  at homes before making sure that their calculations jive with the lenders criteria, they may find their dream home only to discover that they can't obtain the loan they thought they could. After that, nothing else looks appealing.
So, to have the best experience when purchasing a home, find an agent you like and feel you can work well with and stick with them. 

If your agent knows you're loyal to them, they'll work much harder to find you the perfect home. Make sure that when you attend open houses without your agent that you inform the agent at the open house that you already have an agent who will be making offers for you. 

Don't make the mistake of trying to pit agents against each other to be the first to find you a property.  The good ones won't waste their time.

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