How Do Realtors Get Paid?

First of all, in Florida, there are two general types of real estate licenses: sales associate’s license and broker’s license.  There are further divisions (active, inactive), but for now, those are the two general types.  In order to get a broker’s license, an individual must have had a sales associate’s license for at least two years (it used to be only one).  A person with a sales associate’s license must operate under the license of a broker, or as we say, “hang” their license with a brokerage.  A person with a broker’s license can continue to work under another broker’s license, and in this instance, they are a Broker Associate.  Alternatively, a person with a broker’s license can operate their own office.  All real estate offices must have a designated broker.  There can be co-owners of an office, with at least one owner being a licensed broker – not all owners have to be brokers (they can be a licensed sales associate), but the office must have a designated broker.  In most instances, a Realtor who is working under a broker is acting as an independent contractor, not as a salaried employee or hourly wage earner.  This means that there are no 401k’s, no paid vacation, no sick leave, and no assistance with health insurance, etc. that many people associate with being employed.

When you contact a Realtor to sell your property, which means a market analysis, determination of price, recommendations on presenting the home, marketing, showings, signage and lockbox, open houses, going through offers, home inspections, dealing with appraisals, lenders, etc., a process that often takes months, they do NOT get paid during that process.  And if your house doesn’t sell during that listing period with that Realtor, they get nothing.  Not one thin dime.  They do not get reimbursed for any of their expenses unless you have agreed in the listing contract otherwise.  Thus why Realtors, in most cases, will not take overpriced listings.  Why invest all the time and work into a property that won’t sell with a list price like that?  If your property does sell, if your Realtor is a broker, they are paid at closing when the checks are distributed.  If your Realtor is a sales associate or broker associate, their broker is getting paid at closing; they are paid afterwards by their broker.

If you contact a Realtor to show you property, they do not get paid for researching available properties and comparable properties, making appointments, driving around to and showing multiple properties, drafting offers, presenting offers, determining when a reputable home inspector is available, dealing with the mortgage lender, appraiser, surveyor, etc.  They will get paid at closing if the Realtor is a broker.  If the Realtor is an associate, they get paid by their broker after the closing.  Therefore, if you decide you need to switch agents after enlisting the help of a Realtor who has done more than show you a property, be sure it is for a really good, valid reason.  After all, that agent has been working for free.

The commission split between broker and associate is widely variable.  In both cases, out of whatever the Realtor gets paid, they are paying for office expenses, income taxes, gas, advertising, etc. out of their pay and have to find a way to put something aside for retirement and lulls in the real estate market (if they are thinking ahead).  Remember, until the closing is done, your Realtor is operating strictly on good faith.  They work for free until the closing is done, and that is basically how Realtors are paid.