Monday, May 11, 2009

Your Realtor is an Independent Contractor

I had a buyer-client couple in my car over the course of several hours last weekend. As we were driving between appointments we were chatting about cars. They have seven between them so obviously we were looking for a property with a garage.

As we were driving along, Chris asked if my car belongs to my company or if they provide a car allowance. A reasonable question to ask of most salespeople but certainly not the case for a Realtor. I told him that it most defintely is my vehicle and that I am an independent contractor and pay most of my business expenses out of pocket; out of my own pocket.

It was a question I've been asked before but it brought back the realization that many consumers still have no idea how we realtors are 'paid.' Often they think we are paid hourly for those tours we give them of a new area or that we drive a company car. I explained to Chris I work under the 'umbrella' of a broker and I share my commissions with the company.

The percentage that a sales agent receives is determined by the employment contract the agent has with the Real Estate Company. Real Estate Agents are independent contractors and receive no financial benefit other than the sales commission. We are responsible for our own vehicles, auto insurance, gas & maintanence, malpractice insurance, computers, cell phones, and medical insurance to name some of our business expenses.

Certainly there are many different 'compensation programs' out there in real estate. Realtors who are affiliated with a franchise firm pays royalty fees. There are agencies who provide their agents with desk space, administrative support, a phone/computer line and cover soem of their advertising expenses such as business cards and print ads in local papers and magazines. Some pay none of that and the agent pays all expenses either per month or per transaction.

The important thing for the consumer to know is that your agent, whether representing you as a Buyer or Seller, receives no compensation until AFTER your transaction closes. No closing, no paycheck. So a Listing Agent representing the seller will likely have spent money during the time of the listing for advertising, color brochures, virtual tours, signs, etc, planning to recoup those expenses after the sale. A Buyers' Agent has the auto expenses already mentioned plus cell phone, computer, etc. An agent taking you around to see various listings is not being paid by anyone. They will be compensated when, and only when, they represent you in the purchase of a home that gets to closing.

Client loyalty is a valuable commodity to Realtors. If you find a Buyers' Agent you like and who seems to be doing a good job for you, stick with her! And Sellers, be sure you have given your Listing Agent an opportunity to sell your house before thinking you 'need a new agent/company.' When you change agents or real estate companies, that first agent has no chance to recover those expenses already spent on trying to sell your house.

Certainly if you are not happy with your agent for any reason, talk to her! Give her an opportunity to do for you what she's there for. As always, communication is the key to a successful business transaction.

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