How Real Estate Agents Make Money

Throughout the process of real-estate sales, real-estate agents typically make money at least one of two ways.

Firstly, it’s significant to understand that the majority of real-estate agents are not their own boss, and answer to a brokerage firm or real estate agency. That is, as the only scenarios contrary to this would be an individual whom buys and sells houses for a living a career, but more commonly as a side or part-time job. Such individuals and professionals can make such an income if they have a substantially large amount of money to invest into such a buying and selling system, or, by perhaps through inheriting property by other means.

On the other hand, the majority of real estate agents make their money either based on commission typically around 6%-8% of the sales price. Interestingly enough however, and a lot of people don’t know this, there are indeed a large share of real estate agents that simply work on a fixed rate or are commissioned per sale.

In a nutshell, real estate agents make their money once a house is sold, may it be through cash payment, loans, or leasing mortgaging, etc. The commission type and amount can just as easily be based on the type of sale or purchase as the more it benefits the brokerage firm, the more it will financially benefit the real estate agents pocket.

Its important to understand that throughout the process, in commission-based work, that real estate agents are not paid until the sale is finalized not when the first payment is made. That is, following a contractual agreement. In contrast, the same could be said for a car salesman, once the car is sold regardless of when or if that individual makes the first payment to the bank as long as he or she was approved and signs the sales agreement, they are in the right position to be paid their commission.

Luckily for real estate agents, in the case of buying houses, if a seller decides to retract his or her offer or attempt to change a contractual-agreement or otherwise stipulated sales agreement, the real-estate agent can still be paid the commission, and the remainder of such a discrepancy will be handled directly through the brokerage firm sometimes through legal ramifications if necessary.

While many people gain interest or seek a career as a real estate agent, its in-arguably a very demanding job and ultimately one can only be expected to make out of it what’s put into it sometimes upwards of 50-70 hours per week. Many people then, elect to become licensed in their state to sell or buy real-estate as an agent, but it’s not their primary job, since it’s so stringent upon the successful transactions of buying and selling properties which can be sporadic or seasonable at times.

 

How Real Estate is Appraised

Real Estate appraisal is typically conducted by a third party (neutral) Appraisal Management Company (AMC) in the process of attempting to gain a loan for purchase or price-point for a fair-trade market selling price.

However, real estate agencies and agents, barring they are licensed and certified, are likewise authorized to make such appraisals per state regulations.

A real estate appraisal is based, typically, off of the following several determining factors:

  • Condition of the property (and landscape if applicable)
  • Location of the property
  • Crime rates or lack thereof in the general area
  • Proximity to schools and other establishments of convenience such as major malls or churches
  • Proximity to major highways for convenience of commuting, as well as to take into consideration likelihood of (unwanted) noise pollution to the direct vicinity.
  • Local comparable properties for sale, recent sales, purchases, and equating such a formula to generate a fair-market based quote or appraisal for your real estate and home.

Other significant, unique variables that come into play are any additions to the house, repairs necessary, the landscapes total square footage, and overall desirability in selling or ability to resell the property at a later-date.

Understanding your options

As a real estate appraisal is not set in stone, it’s typically open to negotiations between a real estate agent, brokerage firm, and the seller or buyer. Understandably, there will be some sort of mark down in the offer, in efforts for the brokerage firm to make a profit, as well pay their real estate agent commission for initiating and finalizing the sale or purchase.

It’s worth noting and understanding that for your convenience a property, of course, can be sold for a much lower price for if you’re in a rush or otherwise urgently need the money and some real estate brokerage firms–dependent upon the state–have the ability to pay collateral or a security deposit to you for the property or sale in advance at their discretion.

Whereas someone might not want to lose too much money, feel they aren’t getting a fair profit, or simply want to wait it out, it’s worth considering not only the current economy, but also recent traffic of house sales in your area as such variables are also equated into the offering price for your home or real estate.

For example, too much buying and selling in your area could prospectively lower the price or value of your home as this could be a bad sign or otherwise demonstrate a form of a lack of desirability for your property and those in the local vicinity or neighborhood.

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