In the real estate industry, we all hear the word commission.  In reality every job out there you get a commission for the time you put in for your position, right?  Well commission jobs are structured differently.  With commission jobs, taxes are not taken out of the pay checks, so the recipient of the commission pays their own taxes, weather they are state or/and federal taxes, not to mention if they want any types of health or medical insurance, they pay for it out of their own pocket.  We call this type of employment an independent contractor also known as 1099.  The other form of employment is a W2 employee. This means that taxes and other benefits like medical, dental, life, etc... those are all taken out of their paychecks.  Both are valuable, and both have their pro's and con's.

WAGES

I will talk about commission / independent contractors as that is what most sales positions receive and also real estate agent as well.  But I will change the word commission to compensation.  When you are W2 you get compensated for your hourly or salary position.  In Sales like real estate, the agent does not get paid anything until it closes.  How awful would that be if you were a W2 position and you were told to do a project but you didn't get paid till it was successfully completed.  Understanding how 1099 works, it can help you understand how real estate agents and other sales commission jobs are.   No one gets paid till the sale is completed. 

Well, I know people feel that real estate agents get paid too much. The problem is, people see the bottom dollar and that's it.  What they don't see are the hours and hours, real estate agents and sales people put in for their clients and customers.  All the training they need for their position, the hours working on the project or the listing / buyers, and the time negotiation contracts with the other parties involved.  There are other matters involved specifically with real estate agents and that is working with the vendors like title companies, attorneys, courts, home inspectors, cities counties or state employees and laws, HOA's and so on. Agents do a lot of behind the scene work that the clients and public might not see or know about.  I never really understood this myself until I began my career as a real estate agent.  Yes, we get paid in one-time payment after the transaction closes but if you really break it down per hour, real estate agents get paid just about $15-$30 per transaction. Yes, if its multi-million-dollar deals then it might be more. But I do my job full time to support my family just like anyone else with a 9-5 job.

Who Pays

Now the big question is, who pays the compensation, well the client does. In each contract the client is responsible for the commission or compensation to their agent.  Here is a key note: COMMISSION RATES ARE ALWAYS NEGOTIABLE!!! I always work with my clients with my fees.  And we know it's been known that sellers pay buyers agent commissions, well, those area also negotiable.  Do sellers have to pay the buyers agent? No, they don't.  Does it help sell the property? Yes, it does.  If your employer said to you, hey I know we hired you to do your job, well here is a project you need to do and we won't be paying you for it because, well, we don't feel we need to.  I know that sounds a bit extreme but that’s really how it is. I'm not saying you have to, but it can help you! 

Really why I decided to write this blog was for you to see and for my transparency. I want you do see what my position is and why I do what I do, and your position is and the abilities you have when buying or selling a home.