How Does a Real Estate Agent Make Money?
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The Real Estate Agent
A person becomes a real estate agent by attending a certain number of hours of training, passing a state test and obtaining a license to engage in real estate sales from the state where they will work. During the training most potential agents get a feel for what area of real estate they would like to focus on. In most cases it is general real estate.
General real estate is listing homes for sale, selling homes to buyers and renting homes to tenants for landlords. Commonly, the agent does all of these but in some cases they specialize in just one area. Some people are better at working with buyers and so they become a buyers agent. Others only work with sellers and some become property managers that work with landlords and tenants.
Although there are designations that certify an agent has special training in one certain area of real estate, a real estate license does not limit an agent to any specific area.
More and more, buyers, sellers and landlords are looking for expertise in their agents, so specializing in a certain area can give an agent an advantage when competing for business. Other areas of real estate that agents may specialize in are commercial real estate, bank-owned properties and relocation specialists.
Listing Properties for Sale
When most people are ready to sell their homes, they call a real estate agent to find out what the home will sell for on the current market. The real estate agent will do a comparative market analysis on the home and explain to the home owner what comparable homes are selling for. They will explain what their company will do for the seller in order to get the property sold in a reasonable time and then list the home for sale. The agent will then enter the listing in the Multiple Listing Service for their area and begin to market the property.
Marketing is done in different ways according to the property to insure it is being put before the properties specific target market. In most cases, a residential home would be placed on the companies website first. Postcards would then be mailed out to surrounding neighbors, to let them know the home is for sale in case they know of a friend or family member that has stated they would like to live in that neighborhood. Then advertisements would be written for real estate magazines and classified ads. Most real estate magazines have their own websites and the listing can reach hundreds of thousands of potential buyers overnight.
Besides marketing, the listing agent is responsible for setting up the appointments to show the property for any other agent that may want to bring their potential buyers to view it. Once a contract for sale is obtained, the listing agent will be the liaison between the buyers and their agent and the sellers, helping to negotiate the best possible transaction for the seller. The property then goes to settlement and title is passed from buyer to seller.
The real estate brokerage then earns a commission and the broker pays the agent a percentage of that commission.
Helping a Buyer Find the Perfect Home
A real estate agent working with buyers will interview them to find out what type of home they are looking for. The agent will usually do some research on the computer and locate properties that fit the parameters of the buyers requests.
They should also have a good working knowledge of the market in which they work and may know of just the right home. They then call and set up appointments to take the buyers to see these properties.
The buyers may find the property they want in a day or it can take months. If a property interests a buyer, the agent should find out every piece of information they can about the property to present to the buyers. Once the property is found, the agent writes an offer to purchase contract for the buyers and presents it to the sellers agent.
The agent will advise in the negotiations between the seller and buyers to insure the best price and terms for the buyer. The agent will also help the buyer with financing, ordering certifications and inspections and getting them to settlement.
At the final settlement a commission is collected and paid to the real estate brokerage. The broker of the buyers agent then pays the agent a percentage of that commission.
Other Ways for Real Estate Agents to Earn Commissions
All commissions are paid to the real estate company and individual agents are paid by the broker of their company. Rental commissions are paid to real estate companies for renting homes or apartments. The agent that brought the landlord or tenant to the company is paid a percentage of the commission either monthly or by a one time up front fee.
Some real estate agents do Broker Price Opinions for lending institutions. These are normally paid as a fixed fee, not a percentage. Commercial real estate and land commissions are negotiated much the same as residential and paid as a percentage of the sale.
In some states, real estate agents are allowed to do appraisals with certain restrictions and can be paid a fee.
Lastly, very successful agents sometimes do training seminars and are paid a fee. Some agent have made training a career and are quite successful.