How Do Realtors Get Paid?

To get a realtor or not, that is the question... or is it? Hit play to learn why you should never buy your first home without a realtor.

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Contributors to this episode include:

Host - Jeremy Goodrich Copy Editing - Talia Chakraborty

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Full Transcript:

Jeremy Goodrich:
Hey there new home buyers, Jeremy Goodrich here. I am that guy, that guy that bought my first home many, many years ago and had no idea what I was getting into. I didn't use a realtor, I didn't have an inspection, I didn't have a clue what documents I was signing, and I ended up, you guessed it, buying a beat up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter, you're three times more organized and you're 10 times better looking than he was. You're going to find the right home for the right price and you're gonna have fun doing it. That process starts right here with the New Home Buyers Guide Podcast. We're glad you joined us.

Welcome back new home buyers to episode three of the New Home Buyers Guide Podcast. I'm Jeremy Goodrich, your host, and I'm real excited about this episode. It's a super short episode, only about a five minute conversation and answers one specific question. That question is how do your realtors get paid? Because, it's a great answer and you definitely wanna hear exactly what the answer is to how realtors get paid, because as a buyer it's important to understand that. It really is important to have a realtor on your side as you're walking though the process. We'll talk more in future episodes about why that's so important.

In fact, if you're early in the process right now, you're just considering the home buying process, you're getting your credit right, you're saving for your down payment and you haven't been pre-approved for a mortgage, then it is not the right time to hire a realtor. We're gonna set you up in the course, in the online course at newhomebuyersguide.net, we walk you through the exact process of getting set up and tell you exactly when you should hire that realtor. 'Cause realtors, good realtors, the kind of realtors you wanna work with expect certain things to be done before you even contact them. We'll address that in the course. But right now I just wanna give you a little bit of information about realtors in general, and that is how realtors get paid.

I brought a great friend of mine, a wonderful realtor, her name is Beth Ellis, and you'll hear her voice in multiple different episodes of this show, as she describes to us different parts of the process of buying a home. Without further ado, let's dig right into the conversation with Beth Ellis how realtors get paid.

How do realtors get paid?

Beth Ellis:
That is a really good question. Honestly, first time buyers are not comfortable asking that, because they're not sure how the process works.

Jeremy:
Yeah.

Beth:
Generally speaking, the way that it works is when a realtor lists a house for sale, they have negotiated a commission with that seller. When they put that house in the MLS, which is our homes database, they have agreed to cooperate with the buyer's realtor and pay them at the closing. The buyers, it's great news for the buyers, they don't pay us. The sellers pay the realtors and that is negotiated upfront like I said with seller of the home. The nice thing is that realtors can show buyers any house that's for sale in our market that's been listed by another realtor or by their own company. We don't have to show just the ones that we have for sale, because we know that we're gonna get payed if our buyers buy any of those houses that are listed on the market.

Jeremy:
Okay, so let me see if I get this straight. A buyer does not pay for a realtor?

Beth:
Right.

Jeremy:
A seller pays for both realtors?

Beth:
Right.

Jeremy:
Based on a negotiation they did before listing the property?

Beth:
Right. When they sit down and meet with the listing realtor, they negotiate out a commission. They agree to that, that's part of the listing contract that the seller would sign with their realtor. Then when that person puts that house for sale in our MLS database, it clearly shows that they are cooperating with the buyer's agent, and that the buyer's agent will get paid at closing if that buyer buys that property.

Jeremy:
Is there a wide array of amounts of money you can get paid? If you represent a buyer, do you necessarily know what you're gonna get paid?

Beth:
I do know what I'm gonna get paid, because the listing agent puts that information on the private side of the realtor database of our MLS database, and there are wide varieties of fees that we get paid. We do not have a standard or a set fee, it's illegal for us to get together and say we're all gonna charge one million dollars for each listing. That fee is always negotiated between the listing agent and the seller.

Jeremy:
Okay, can you give us some example of what that fee could look like, somewhere ... Is it a percentage [crosstalk 00:05:41]?

Beth:
It's a percentage of the sale price, not of the list price.

Jeremy:
Okay.

Beth:
Depending on what the listing agent did with the seller, some of those people split that fee evenly with the listing agent and the selling agent, and sometimes they don't split it evenly.

Jeremy:
Okay. So, seller pays both realtors, that's based on a percentage usually of the selling price.

Beth:
Right.

Jeremy:
Could vary for different scenarios, but ultimately if you're the buyer, if you're a buyer and you're hiring a real estate agent, you don't really need to worry too much about that.

Beth:
Exactly. I tell my first time buyers there is absolutely no reason to buy a house without a realtor. Because, one, you don't pay us, so that's good news. Two, we know what we're doing. Usually first time buyers don't know what they're doing and there's no good reason for them to try and navigate through that process without a professional person helping them get the best deal on the best house for them through that process.

Jeremy:
So not only do you get the service of having a professional who's inside the industry helping you walk through it, but you ultimately don't even have to pay for it?

Beth:
Right.

Jeremy:
Okay. Well, I don't see any reason to buy a house without a realtor.

Beth:
Absolutely.

Jeremy:
Thank you Beth so much for being with us. If someone wants to find you, how can they do so?

Beth:
Sure. My email is [email protected].

Jeremy:
There it is home buyers. There is absolutely zero reason not to have a realtor on your side while you're looking for homes, while you're deciding exactly what fits into your budget and your idea of a lifestyle you wanna live, helping you to negotiate the process, helping you to walk through all the steps that happen from the very beginning, to looking at houses, to negotiating the offer on the house of your dreams, to the closing process at the very end. All those steps are helped by a realtor, and it doesn't even cost you any money. There's no reason not to have a realtor.

All right, what are your questions? Head over to the Instagram page, the New Home Buyers Guide Instagram page and find the post for episode three and tell us what you liked, what you didn't like, what questions you have about this episode and what questions we could answer in future episodes that will help you to have a better home buying experience. Also, if you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists and videos and a private group just for members. You can find all of this at newhomebuyersguide.net. If it isn't the best bit of home buying advice you've ever experienced, we will gladly refund your money. But, really, when you see the price, even the third of the information we provide and the community that is behind that paywall would be a 100% worth it. Until the next time, happy home buying.