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.

A Realtor's Currency is Prospective Buyers

If a buyer walks into a real estate office with bad credit, no down payment, dressed in torn jeans and a dirty T-shirt, they can expect to be treated politely but be promptly ignored. It's like a penny in a parking lot; no one bothers to pick it up.

Say the buyer has fair to good credit, some savings, and takes ordinary care in getting dressed that morning. The buyer will find the same polite reception and will also find realtors willing to work for them because almost no one ignores a quarter on the sidewalk. Their calls will be returned and efforts will be made to find them a property to purchase. The realtor knows there's a pretty good chance a commission check is in their future.

A potential buyer walks into a real estate office pre-approved for a loan, has a substantial down payment in the bank, and is dressed in a business-like manner. Realtors will bump heads trying to pick up that dollar bill. They know a commission check is in the works and will do whatever it takes to make the sale.

All Realtors Hope for a Pre-approved Buyer

Fair to good credit raises your worth to the realtor, as does some savings for the down payment. Dressing the part doesn't hurt either. First time impressions do tend to last.

You can have all the right elements in place to impress; and yet, the realtor doesn't know if you can get the financing to become a buyer.

A pre-approval letter from a bank or lender is the first-time buyer's ace in the hole. It takes about an hour to fill in the blanks and up to a couple of days to get the pre-approval letter. Your lending institution can steer you in the proper direction. Walking into the real estate office with your pre-approval letter lets the realtors know you are someone worth their time and effort.

Realtor Dual Agency

Dual Agency is a fancy phrase that means the realtor represents buyer and the seller. The realtor doesn't have to share the commission. Being a dual agent is great for the realtor; it also means that the buyer could be getting less than the best representation. Your realtor isn't just working for you; he's working for the seller also. Think of it in terms of the courtroom. If you were being charged with a crime, would you want the prosecutor to be your defense lawyer? First-time buyers need to have a realtor dedicated solely to their best interests.

First Rule of Engagement for Realtors

Most real estate companies have unwritten rules of engagement, and the first rule is that if a potential buyer asks about a certain piece of real estate then that person is directed to the realtor who has that listing.

You walk into a real estate office because you saw an advertisement for a particular home or piece of property. If you inform the receptionist that you want information about a particular property, you have already made your first mistake. You are now tied to the realtor that has that listing. It doesn't matter if that realtor is the top producer or the new kid on the block. You're stuck with that realtor for the duration.

Second Rule of Engagement for Realtors

Buyers who walk in the door or call without a particular property in mind belong to the floor realtor. Most real estate companies have a sign-up sheet for floor days. The realtors sign up for floor days because the realtor on the floor that particular day acquires all potential buyers who walk in or call.

You walk in a real estate office and say, "I'm looking to buy a house." Guess what? You get the floor realtor. It's the luck of the draw; whoever is on floor that day becomes your realtor.

Don't Let the Realtor Choose You, YOU Choose the Realtor

The easiest way to avoid these common mistakes is to research the real estate company before walking in the door. Check out their web site and each realtor's listings.

Call the real estate company and be moderately honest, tell the receptionist you are shopping for a realtor and want to know who their top-selling realtor is or who has the most experience representing buyers.

Do not give your real name; that way you're not tied to the floor realtor. Do not ask about a particular property unless you want to work with the realtor that has that listing. Do not sign up with the realtor who has that listing; dual agency is never a good idea for the first-time buyer.

You have a choice. You can take a chance with the first realtor you meet and hope you get a great one, or you can investigate and learn what you need to know before calling the realtor of your choice.