Real Estate Agent Salary Vs Commission

Agent Advice

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Published date: Jan 07, 2019

real estate agent salary vs commission

From time to time we come up with forecast articles about new disruptive technologies like Self-Driving Cars, Cryptocurrencies, Blockchain and overall trends like the fact that the US Life expectancy is dropping, and the most pessimistic agents start to stock food for the long winter and predict the complete extinction of jobs and total machinery take over. Take it down a notch, guys! A forecast is not a done deal, and the fact that we can detect it creates, most of the times, an opportunity for us to ride it the best we can.

 Having said that; here’s another “prediction” coming: the real estate industry will increasingly shift into specialized functions within the agent’s job description and a real estate agent salary instead of an agent commission will become much more common than it currently is.

Let’s understand why:

Who pays the real estate agent?

As we all know, agents earn a commission – a percentage of the sales price of a home. The more expensive the home, the more money they make. But who pays the real estate agent, really?

The mortgage company pays the home seller - on the behalf of the home buyer - a set amount for the house that includes both the buyer’s and the seller’s agent commission. The home seller, then, separates the real estate agent commission to the seller’s agent to divide between him and the buyer’s agent. So, technically, the home seller “loses” a little bit of money to the agents for their help in making the sale. Although the home seller makes much more money than the agents, emotionally, they think “well, if the buyer paid X; I could’ve won X instead of X minus the commission”. Suddenly, despite the amount of money more they made because of the agent’s help, home sellers started to view commissions as the bad guys.

Knowing that humans always want more money in their pockets, other humans started to look for ways to make home sellers fulfill their desire - and get some money in their own pockets in the process. Several disruptive companies started to pop up and offer ways in which For Sale By Owners (FSBO) could flourish without the need for professional help. Home Buyers and Home Sellers rejoiced: they were able to sell the home and at least *feel* like they had more money in their pockets – because the truth is that, with the use of an agent, 9 out of 10 times they sell their homes for more and, despite the feared real estate agent commission, end up with more money in their pockets than if they sell by themselves.

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(Our) Empire strikes back

To fight against client evasion, more and more real estate companies have dabbled with paying salary to its agents and, in return, offer the home seller a discount on the real estate agent commission or even completely waive it. The home seller pays a fee and signs a contract that binds the seller exclusively to that. During 6-months (or more) the company will render all services for him and get paid for that just like any other service.

Some might frown upon the idea and say that home sellers with no money lying around won’t go for that one. And they’re right! Again: the fact that this is happening and will happen more and more doesn’t mean that the classical way has its days counted; just the complete dominance of it. The type of home seller that will embark on the agent salary journey is the one who thinks their agent doesn’t pay that much attention to his/her particular property. That thinks they have a basket with several properties and whichever sells it’s fine for him/her – after all, one real estate agent commission alone can save the whole year.  The real estate agent salary regime sort of forces the company to pay close attention to each individual client because there’s no commission at the end of the process. Their satisfaction is what will give them money. If they don’t sell and appear like not doing their best, the home seller will go elsewhere and pretty soon no one will look for their services.

There are some questions that are still left hanging regarding the agent salary. Like: how do real estate agents get paid in this regime? Is it a monthly salary, or do real estate agents get paid hourly? Because the salaries will naturally regulate with other industries of the same area, will the real estate agent salary in California be the same as the agent salary in Texas? The bottom line is that the industry has smartly addressed the home sellers and home buyers unwillingness to share their money, and, through that action, several others have trickled down into one fact: the future holds space for fewer agents overall, and the spots vacant will be more and more available to specialized professionals. Let’s see why?

Specialized services

The truth is that the seller’s agent does too much. He has to go after clients, list the home, market the home, negotiate deals and overview closing. Considering that each home (and client) requires a different strategy and he can’t do one client/home at a time… it was just a bad inefficient business model. So it was important both for the agent and the client to break down this amount of tasks into several specialized services, and that’s what we’ve been seeing.

Autonomous professionals are becoming a rare breed – most of them work under big real estate companies and even the brave ones who go “solo” understand the need of building a real estate team. Company guidelines favor niched professionals to meet the specific needs of clients – say real estate agents specialized in homes for the disabled for the growing demand for special needs clients. Company guidelines and philosophies are also perfecting the process by taking some of the tasks that do not require a licensed agent and giving them to other professionals whose salary is not that high – like social media communication. And also, for the ones who are reading this article to get paranoid, yes, them, robots and artificial intelligence. AI and robotics are not replacing agents, but freeing them to get more work. Instead of having to be present at a showing or having a one-on-one with every single guest of an open house, why not have a voice-activated smart home device hooked to a database to answer repetitive questions like “What is the square footage of the house?” and “What is the asking price again?”.

The Real Estate Industry has been historically slow to pick up on technology and embrace it as a way to keep playing the cards in the game. But the rise of real estate agent salary and specialization of its services are great indications that, this time around, the industry is taking charge of its destiny. Sorry pessimistic, but you’re getting out of this article pumped and excited: although one real estate agent commission can give you quick “easy” money, salary is not a rare thing anymore and, if it “reaches” you, fear not; embrace it! Every good professional gets rewarded accordingly. We bet you’ll make the most of it!

Comments for Real Estate Agent Salary Vs Commission

Max Sims Max Sims said:

remove this

Jan 19, 2019  14:50:24

Real Estate Agent

What exactly should we remove? And why?

Jan 23, 2019  07:56:15
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