How Do Realtors Get Paid?
When a Seller lists his home for sale with a Listing Broker, the Seller and Broker negotiate a listing fee or commission. The total listing fee or commission is used to compensate both the Listing Broker and the broker who works for the Buyer (the Buyer's Broker). After the transaction closes, the Listing Broker sends a certain portion of the total listing commission to the Buyer's Broker as compensation for their part in the transaction. That portion of the listing commission that is paid to the Buyer's Broker is sometimes called the “payout”.
The typical payout by a Listing Broker is 45% of the total listing commission. But there is no law that governs the payout amount and it is determined by each listing broker. The payout amount is also called the “Cooperating Broker Compensation” and it is advertised in the home’s listing information in the RMLS database. The RMLS creates a trust system whereby the Buyer's Broker is assured of compensation, even though he does not get any money direct from the seller.
So the Buyer’s Broker gets compensated by the Listing Broker, who gets paid by the Seller. Minnesota Law is perfectly comfortable with this compensation arrangement. It does not create any conflict of interest on the part of a Buyer's Broker.
However -
Minnesota Law requires that the amount of money a Buyer’s Broker will receive from the Listing Broker be disclosed to the Buyer prior to the Buyer signing a Purchase Agreement. If the agent assisting a Buyer is not a Buyer’s Agent then this disclosure is not required by law.
Another way a Buyer’s Broker can be compensated is by the Buyer paying the Buyer’s Broker. However, this does not occur very often.
By law, only Brokers can receive compensation from sellers or buyers or from other brokers. Agents can not accept money from sellers or buyers and Agents can only receive money from the broker that holds their license. Therefore, compensation money passes from the seller to the listing broker to the Buyer's Broker. The listing broker splits the money he keeps with the listing agent. The Buyer's Broker splits the money he gets with the Buyer's Agent. The exact amount of money each agent gets depends on the commission-split agreement the agent has with his broker, which is normally from 50% to 100%.
That's How Realtors Get Paid. If you'd like to talk more about this topic Call me or Email me
Michael Harrell, Broker, Owner
Affordability Expert
email MultiCultural Realty
612-759-7629
MultiCulturalRealty.com
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