Real Estate Agent Payment Structure

Real estate agents, whether I’m representing the buyer or the seller, get paid a percentage (%) of the sale. This % is determined in a contract between the listing agent and the seller, and paid out of the seller’s proceeds once escrow closes. What are the ramifications of this payment structure?

Ideally nothing. An agent should represent his or her client to the best of his or her ability. But you have to wonder what motivation a buyer’s agent has in getting his client the best deal on a property if he’s losing 3% of $10,000 or $300 by negotiating his client a discount.

Conversely, what motivation does an agent have in getting his client $100,000 over asking on a sale if he’s only making $3,000 extra for being good at his job? After all, a relatively competent agent could sell a million-dollar house for a million dollars and make $30,000 commission. So is being a great agent really worth the extra couple grand?

From a financial perspective, the only reward for being the best agent possible is referrals. I average selling my listings for over $100k or 6.9% over asking price, for which my reward is approximately $3,000 per listing. I guarantee you that extra bit is not my main motivation. My financial motivation is to tell you, my new client, that I sell my listings at an average of over $100k or 6.9% over asking so that you will trust me with your next listing. My reputation is my most important financial resource and getting my buyers and sellers the best deal possible is always the means to that end.

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