We earn no salary, and no other income and this is why 80% of the people who get a real estate license are out of the business within the first two years.
Buyer broker agreements are becoming more common. They state that the buyer will ensure that their agent receives a certain percentage of the sales price as their commission or "salary" when the home closes. That means that if the listing agent and seller are offering less than that negotiated buyer brokers commission, the buyer makes up the difference. This frees up the buyer's agent to show FSBO homes and other's that they wouldn't normally be able to work with. As stated above, that commission is collected and disbursed by escrow after the sale closes.
The contract between the seller and the listing broker defines when, how, and under what circumstances a brokerâ€™s compensation is earned. Until the recent few years, most listing contracts held that compensation was in the form of a commission and contingent upon producing a buyer. From earlier answers on this thread, most agents here are working on a contingency commission contract that has the Broker being paid a closing.
In recent years, we have seen the entrance of several alternative real estate business models providing sellers many choices. Sellers are often interested in saving fees and one way sellers can do this by paying flat fees upfront for partial or complete compensation to the broker who will represent them. There are many new models emerging that have a payment components at the beginning, middle and end of the transaction. There are also models where the listing broker fee is paid at the time a listing is taken, but the buyer broker fee is paid at closing. Fee compensation may be in the form a flat pre-determined amount, or a commission.
Buyer agency agreements are becoming increasingly common, and we are just beginning to hear more about retainers paid to buyer brokers. For those who view the buyer as the one paying the Brokerage fee, a retainer agreement can be quite acceptable.
It is still common for many brokers who are working on a contingency to receive their entire commission at closing. Commissions are often deemed earned when a ready, willing, and able buyer is presented to the seller. Although often deemed earned before that point, Brokers generally wait until closing to receive a contingent commission. The settlement agent (title company, broker, escrow agent, or attorney) will cut the checks to the Broker from proceeds at closing under this arrangement. Payments are made to the Broker, not the agent. Brokers then pay the agents based upon the contractual or employment agreement that exists between the brokerage and the agent.
While most answers on this thread stated that the Broker was paid at closing, and that has been common for many years, we are an industry in transition. While the contingent commission at closing remains the most common, it should not come a surprise to you if someone approaches you with an alternative business model or proposal.
Deborah Madey - Broker
Peninsula Realty Group - New Jersey
I didn't read in J's question an invitation to debate who pays the commission. I did read J ask when does a real estate broker receive their commission.
Please excuse the dialog with Tman. My apologies to you. Answering your question next.
Contrary to what some agents might want consumers to think ... buyers *do pay* the commission on the sale of a home, anything else is just a false statement ...
This is a small excerpt from Mr. Michael Daly being refreshingly honest and candid yesterday:
-- "Oh no, Mr. Buyer, you dont pay our commission, it is paid by the Seller"
As the buyer writes the check to the seller that the seller uses to pay the commission...
....and we wonder why the consumer doesn't trust us...
That said .. depending on what state, most agents get a check at the closing table ..
Typically, the real estate agent receives their commission 2-4 days after close of escrow. Escrow has to close out the file and issue all the checks. Then the check gets sent to the broker who takes their cut and then reissues a check to the agent (unless escrow already took care of this). I have been paid as long as 1 week after close of escrow. An agent makes nothing until escrow closes.
I hope this answers your question.
Joan Patterson, B.A., A.S.P., G.R.I., Realtor
Keller Williams Realty
8250 White Oak Avenue, Ste 102
Rancho Cucamonga, CA 91730