For instance, not everyone is aware that we are only paid when someone buys or sells a home, and that commission is only ever paid by the seller. So if your Realtor tells you that you'll be paying 5% commission upon the sale of your home, that actually means 2.5% goes to the seller's agent (but not really, read on for more of the breakdown) and 2.5% to the buyer's agent.
Realtors are never compensated by their Brokerage – this is a purely commission business, with no salaries paid. All Realtors are self-employed entrepreneurs, and although we are described as employees of the Brokerage (like, in our case, RE/MAX), they do not pay us - in fact, we pay them! The most common financial relationship between the Brokerage and the Salesperson is what's called "split fee". That means that of the 2.5% commission, the Brokerage keeps a portion and the Salesperson keeps the rest. This, along with monthly fees, compensates the Brokerage for looking after things like booking home showings, offering training, maintaining offices, and advertising the "brand". Meanwhile, the Realtor looks after finding clients and performing the multitude of tasks involved in helping them through the buying and/or selling process, and advertising their own listings and services.
Knowing this might also help to explain why people report different experiences with Realtors working for the same brand. Salespeople working at the same Brokerage may employ the same basic business practices (in terms of how money is handled and so forth); however, at the end of the day it's that Salesperson who you will be dealing with on a regular basis, and it’s their personality, skills, experience and marketing techniques that will come to bear when it comes to the purchase or sale of your home. And that’s a subject for another day. - Glenn
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