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However, lately, it seems that most people really don't know what this means. So, here it is.
Commission basis means you are paid based upon the sales you make. Agents don't receive a salary, a stipend, an expense account, or any benefits.
Yes, its true.
I don't get paid until I have sold a property (meaning it has closed) and I pay out of pocket for everything - marketing, gas, car expenses, health insurance, real estate fees and dues.
How It Works
A seller contacts an agent and agrees to pay her a commission amount when she sells the home. The seller's agent then will market the property on the Multiple Listing System and offer a portion of her commission amount to an agent who can bring a buyer who will purchase the home.
While an agent is out showing homes to someone, answering phones, keeping up with a transaction, blogging, previewing homes, answering emails, marketing a listing ..... (you get the picture) - she is not getting paid. Everything is coming out of pocket as she goes about her business of finding or selling your home. Her broker isn't giving her any money based upon future commissions - there is no draw.
Once the home is sold the title company takes care of paying the agent's broker. Generally, the brokerage will take a cut out of the check. In my case, I'm the broker. However, I still have office expenses and other business related items that need to be paid. These get deducted from my commission checks.
In addition, since an agent is considered an independent contractor, she is responsible for deducting her withholding taxes, self employment taxes, funding retirement accounts, paying her own real estate dues, and paying for health insurance.
Many may be wondering .... WHY? Why would anyone agree to spend hours working with no guarantee of payment? Why would anyone work in a business where a weekly paycheck is not guaranteed?
I can't answer for everyone. But, I will answer for myself in the next blog post.
Until next time. Remember, to visit my Las Vegas Homes Web site for las vegas homes, pictures of communities, and other useful real estate information.
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