How Do Real Estate Agents Make Money?

Feb 1, 2023

When you are working with a customer to buy or sell a home in the Huntsville area, the process can be confusing, especially for first-time agents, buyers, and sellers. How will you be paid after the transaction?

A real estate agent in Alabama is paid through commission, but what is commission, and who pays it? What is the commission price based on? Where does our Title Company in Huntsville fit into all of this? Read on to learn more.

How Do Real Estate Agents Make Money?

Rather than being paid a salary or hourly for their work, a real estate agent in Alabama is paid a commission only when a deal closes.

Some agents and companies will advertise their services for a flat fee, but most work off of commission based on the home’s sale price. The exact percentage varies, but a 6% commission is usually standard — 3% for the buyer’s agent and 3% for the seller’s agent.

Since a real estate agent in Alabama is only paid when a deal closes, a lot of time passes while the buyer searches for the perfect fit or the seller finds the best offer for their home. An agent can put in a lot of work without seeing a paycheck.

Who Pays Your Commission?

The home seller usually pays the real estate agent’s commission. A buyer doesn’t pay to use an agent. Generally, agents’ commissions are taken from the seller’s profits. A seller usually doesn’t bring cash to closing to pay real estate commissions.

Title companies like Boundary Title in Huntsville will set up escrow accounts to hold all funds from a real estate transaction and make sure money is given to the appropriate people after closing is complete.

What Of Your Services Does a Commission Cover?

While it certainly is an option to go through the process without an agent, using one is recommended. If you’re selling a home, agents provide a wide array of services like marketing your listing, helping you price it appropriately, holding open houses, and sometimes even finding the perfect buyers.

Agents can help you get top dollar for your home. Recent figures show that homes using an agent sold for an average of $330,000 compared to $225,000 for “For Sale by Owner” properties. That’s a difference of $105,000!!! A real estate professional assisted 86% of sellers in selling their homes in 2022 — and we can see why.

Additional Real Estate Commission Information

All of the agent’s commission details should be outlined in the listing agreement — the contract signed when agreeing to sell a home. The listing agreement also specifies how long the agent will represent you. Most deals are for 90 to 120 days.

Real estate commissions may also vary depending on the type of property. Commissions for lots may be higher due to the higher cost of marketing a vacant piece of land. New construction homes may also have different structures than existing homes.

Boundary Title: Your Huntsville Real Estate Partner

The experts at Boundary Title are your real estate partners in closing a deal. You can rest easy knowing that our Title Company in Huntsville is dedicated to your client’s transaction and your success as a real estate agent in Alabama.

This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.