A Realtor's True Motivation Is that Commission Check

Realtors can help you find your dream home. While a realtor is very helpful and can be an invaluable asset in your real estate search, they are not there to serve you. They are there to make money. And they make money through commissions—the higher the selling price, the bigger their commission check.

How the Commission System Works

Real estate commissions are generally from 6 to 10 percent across the country, depending on the type of real estate. The buyer's realtor and the seller's realtor usually split this commission. Realtors are not employees, they are independent contractors. Realtors work for a percentage of the commission percentage. The owner of the real estate company (also called the broker) contracts with the realtor to pay the realtor a certain percentage of the commission. Confused yet? An example concentrating on the buyer's realtor:

• The buyer's realtor has contracted with the owner of the company to receive 60% commission on all the realtor's sales.
• A buyer purchases a $100,000 property listed at 6% commission.
• The seller's realtor and the buyer's realtor each get 3% or $3,000.
• The realtor gets 60% of the 3% commission, so the realtor can expect about $1,800.
• Not so fast; before realtor's name is ever printed on the check, there are deductions for office dues, franchise fees, and advertising fees. The realtor can reasonably expect a check for about $1,500.

The realtor has worked for days, weeks, or sometimes months on this one purchase and actually receives about one quarter of the total commission. The realtor has filled out miles of paperwork, spend hours finding the perfect property, dealt with all the necessary legal details, inspections, and hassles. It doesn't take a rocket scientist to see why realtors work harder at reeling in the big fish and often let the little fish swim away.