No matter what field you decide to go into for your career, getting the right compensation is vital. Most individuals will be given a salary or other figure of some kind. There could be other avenues to earn more money in their respective positions.
In the real estate industry, the commission is one way to get a little extra money at the end of the day. How commission works will vary from professional to professional. The life of a real estate agent could be very profitable. You can earn lots of money in this unique career path.
Let’s learn more about how commission works for real estate agents:
How Real Estate Commissions Work
Let’s define commission is in the context of real estate. Typically, a job is considered complete for a client when the closing is a done deal. Once this deal is finished, the real estate agent will earn a percentage of the home price. Of course, the commission rate will vary. Since commissions aren’t earned until the deal has closed, real estate agents may rely on commission advances to earn money. There are real estate commission advance companies that give agents the reassurance of a stable income until their next deal completes.
If you are an agent and work with a seller, the commission is only earned once everything falls through successfully. On the other hand, commission may not be earned if the home does not sell. This means that paying out-of-pocket expenses for miscellaneous things may be a given if the closing is not feasible.
Negotiate Real Estate Commission
The commission is volatile since the actual percentage earned can vary quite broadly. However, it is a figure that can be negotiated, depending on a few factors. The property in question is a key factor that can dictate how much of a percentage an agent can earn. Taking a look at the market is also vital when considering a commission.
Depending on the specific agent’s line of work, some service fees may or may not apply. Some agents may choose to reduce their fees right at the beginning of their deal. On the other hand, some may choose to keep their service fees, including commission, since they feel it’s deserved. It is a wide-ranging area that will differ from agent to agent!
Real Estate Commission Rate
Even though agents may have their commission rate, some figures to know of when it comes to deals, for starters, it is important to look at the real estate agent’s location. In the province of Ontario, the real estate commission is generally around five percent.
Five percent is typically split between the seller’s agent and the buyer’s agent. This means that an equal two and a half percent commission rate is given to both parties. Again, this figure will range, depending on the agreement between all parties involved. Some percentages may be larger if one agent has done a bigger share of work.
Real Estate Commission Contracts
One of the most important pieces of documentation to have in any business transaction is the contract. This becomes even more important when it comes to the line of work that real estate agents conduct. Commission rates and who will pay these are usually detailed in a specific section.
For example, if a seller does not pay the buyer’s agent fee, the buyer will be responsible for paying it. Also, it can be stated within the respective contract that the commission will come as a flat fee or the percentage above. If you are an agent, you will have to discuss this with clients well beforehand.
Miscellaneous Factors
Regarding how commission works, there are various factors to keep in mind. For example, the length of time it takes to sell your home will generally not impact commission. The contract itself will already state the commission rate paid to the respective agent.
When you pay your real estate agent for servicing, it is important to be upfront with what you expect of them. By communicating in a kind and honest way, everyone will walk away from the deal as happy as possible.
Real Estate Agent Reputation
Clients may think that most real estate agents are motivated by commission alone. That may impact the perception of what they do on a day-to-day basis. While earning extra money is key, that is not the sole factor.
A good real estate agent simply does their job with little to no effort. A great real estate agent will rely on their reputation to let it speak for itself. Earning commission is a by-product of establishing honest relationships with clients of all walks of life!
