What Do Agents Actually Earn From Their Commission?

A lot of people come to me asking how people make so much money with real estate. But, before you get too excited and get a real estate license yourself, you need to consider the truth about what agents really earn.
Let’s consider a house listed at $500,000 with a commission rate of 6%. In this case, that 6% adds up to $30,000. This may sound like a lot, but what if you start breaking it down?

Keep in mind that 99% of the transactions will have two real estate agents. One agent will represent the buyer, while one is going to represent the seller. This means that the 6% we mentioned earlier is going to be split in half.

But it doesn’t stop there. Agents often work on a team, so the $15,000 you thought was left is actually going to be split again. Let’s be generous and assume this split is going to be 50/50 again, and that the agent will be left with $7,500. What happens from there?

The next time you see a big total and think that’s what an agent is actually earning, think again.

Well, to have an active real estate license, you’ve got to associate yourself with a brokerage. This means that you’ll need to pay fees.

The broker fee can be 30% or even 40%. If you take that fee out of the $7,500 we mentioned earlier, that leaves just about $4,000.

That isn’t all. Then you pay other annual fees, your multiple listing services dues, and a few other costs as well, leaving a grand total of about $3,000.

Ultimately, agents may tend to end up with just 10% of the commission. So, the next time you see a total like $30,000, $40,000, or even $50,000 and think that’s the number an agent is actually earning, think again.

If you have any other questions, would like more information, or want advice on how you can be successful as a real estate agent, feel free to give me a call or send me an email. I look forward to hearing from you soon.

Can a Transaction Be Saved After a Low Appraisal?

What happens if your listing doesn’t appraise? Saving a transaction after this happens is difficult, but not impossible. 

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If a house appraisal comes back at a low value, what can you do?

Imagine you have listed a home on the market for $500,000. After receiving multiple offers, you escalate the price to $525,000 only to later find out that the house couldn’t appraise at that value.

So how do you save a transaction from an unfortunate appraisal? Low appraisals are a difficult hurdle to overcome.

Since the lender won’t give more money than the house is worth, a low appraisal could cause buyers to back out when they realize their offer was too high.

As a real estate professional, I always try to turn these situations into a win-win. I do my best to create a compromise between the buyer and the seller so that the transaction can move forward.

However, this sometimes simply isn’t possible. Certain factors are beyond anyone’s control.

Low appraisals are a difficult hurdle to overcome.

Sellers, though, do have options in certain cases. If you are listing in a seller’s market with very little inventory, you have a much better chance of salvaging a transaction after a low appraisal. Appraisal contingencies may be removed if the conditions are right. Cash offers are also possible—but those are very rare.

Sellers trying to list in a buyer’s market are not in such a good position. It will be very difficult to navigate this kind of situation as a seller.

It’s ultimately best to try avoiding a low appraisal in the first place. If the appraisal does come in low, you still need to carefully analyze the appraisal to make sure everything has been accurately assessed.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.