How Real Estate Agents Get Paid

How Real Estate Agents Get Paid

Posted on Dec 19, 2023

Navigating the world of real estate can feel like navigating a maze without a map. Once you think you’re finally getting your bearingsboom, a dead end. While the journey can be confusing and intimidating, it doesn't have to be. 

A real estate agent can act as your trusted guide, leading you through the twists and turns until you successfully reach your destination—closing day

But how do these agents get paid for their efforts? Let's dive in! 

Listing Commission vs. Buyer’s Agent Commission

Many people assume that whether they’re buying or selling, they’re responsible for paying their real estate agent. While there’s currently a push in the real estate industry to de-couple commissions, the current status quo is that the seller pays for both the listing commission AND the buyer’s agent commission

It boils down to two steps:

  1. The seller agrees to an overall commission percentage (commonly 6% of the home sale).
  2. The listing agent offers part of the overall commission to the agent that brings the buyer. This amount is listed on the MLS—the website real estate agents use to list and find homes.
    1. Though this would often be an even 3% split to each agent, some listing agents opt to keep more for themselves.

Commissions are always negotiable. However, offering a less-than-average split to a buyer’s agent may result in less activity. While agents are supposed to work within their clients’ best interests, many agents operate in a gray-area to secure higher commissions.

Some Hard Truths of the Real Estate Commission Model

6% might seem small until you take a look at the price of an average home.

For example, on a $500,000 home sale, 6% is $30,000! Hiring an agent is valuable, but $30,000 is hefty. Traditional commission-based agents justify the high price tag with arguments like…

  • “I have to split the commission with the other agent, so I really don’t end up with much”
  • “My brokerage takes a large percentage of my commission”
  • “As an independent contractor, a huge chunk of my commission goes to taxes”

…while those arguments may be true at traditional brokerages, that shouldn’t be the consumer’s problem. 

Here at Houwzer, we believe in hiring full-time, salaried agents to correct these outdated issues.

Man thinking at a desk

Pitfalls Faced by Commission-Based Agents

Being a real estate agent can seem like a lot of fun—you get to meet a wide variety of people and tour beautiful homes. 

However, starting out in the real estate industry can be grueling. You have to find clients, guide them through a lengthy process, and reach the closing table…and then do it again, and again, and again.

In fact, most new agents don’t see their first closing until months after they start. Between gas, real estate dues, marketing, and dry spells, commission-based agents often work other jobs to make ends meet. 

We’re all for hard workers, but it’s important to hire an agent who will be available when you need them. 

Since Houwzer agents are salaried, they begin earning money for their efforts on day 1. This security allows agents to dedicate the time and effort they need to ensure their clients reach their homeownership goals.

Agent Representation vs. For Sale By Owner (FSBO)

If agents are so expensive, why don’t more people go the for sale by owner route?

Picture this: through a stroke of bad luck, you find yourself being sued. As you’re preparing for court, you can either hire an attorney or choose to represent yourself. Considering the costs and responsibilities on the line, the vast majority of people would choose to hire a professional to make sure they’re protected. 

Why should one of the biggest transactions of your life be any different?

Though agent commissions may seem steep, the majority of FSBO sellers don’t actually make it to closing—and those who do often leave a lot of money on the table. So how do you ensure you’re properly represented without overpaying? Houwzer was founded to be the solution to that growing problem.

The Houwzer Difference

Because Houwzer agents are salaried, they don’t have to resort to high-pressure sales tactics to ensure they’re paid. Your agent will take the time to make sure your home sale or purchase is truly in your best interestinstead of trying to close as quickly as possible.

When you list with Houwzer, you’ll save money by paying a listing fee of 1% (paid for at closing). 

How can Houwzer offer the same service at a fraction of the price? It’s simple—we don’t overcharge under the guise of “that’s how it’s always been done.” We believe in adapting with the times to provide the best service for our clients, at the appropriate price.

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