An employing broker who hires a broker or salesperson as an employee must

There are many wonderful things about working in the real estate industry, from the joy that comes with helping someone find their dream home to the satisfaction received from being an important part of the community as you help people buy and sell their homes. But as with any job, one of the best parts is getting paid. With previous jobs, you may have received a pay check every couple of weeks or so, and you would know more or less how much you’d make at the start of each workweek. In real estate, there are some key differences in how you make money and how you are paid. So, let’s take a look at this important topic.

The Broker/Salesperson Relationship

We’ve previously mentioned that you’ll be a real estate salesperson or agent when you start out. And in order to receive your license you will have to have it filed with a broker. This broker will sponsor your license, and your license must always be held by a broker while you are a practicing salesperson. While it’s common to say that you work for your broker, it’s a bit more accurate to say you work under your broker, for while it can often seem like your broker is your boss, you are in fact an independent contractor, and not an employee of either the broker or the agency for which you work. We’ll discuss further what it means to be an independent contractor in a later lesson, but in order to understand how real estate brokers and salespeople are paid, it’s important to understand the basics of this relationship.


First let’s take a look at how a broker is paid.

For sales, a broker is most often, although not always, paid a commission. This commission is calculated based on a percentage of the final sales price. There is no set percentage that determines how much a broker will make. Rather this is a point of negotiation when a broker tries to get a listing, and what the commission percentage will be, must be clearly laid out in the listing agreement.

While you may have heard about 6% commissions, that does tend to be the high end of what a commission is, and many savvy brokers will offer commissions that are a little lower to beat out competing brokerages for good listings. Additionally, there are a newer crop of brokerages and startups that offer sellers to only pay extremely low commissions, such as 1% or even less! Recently, the industry has also seen companies that sell themselves to potential sellers based on only charging a flat fee upon the sale of the house. This way the seller knows exactly how much they will have to pay their broker from the start.

In order for a broker to have earned a commission for one of their listings, it’s actually not necessary for the sale on the house to close! Legally, the broker only needs to find a buyer who is “ready, able and willing.” If the broker has found a seller who is legally and financially able to buy the property and is “willing” to proceed with the purchase, then technically, their job is done, and they have earned their commission. That means if the seller decides not to sell after entering into a listing agreement and the broker has found a ready, able and willing buyer, then the seller owes the broker the commission. However, it’s important to note that in practice, the broker will very rarely collect a commission on a sale that is not fully executed or completed, although it is not so uncommon for a seller to withdraw a property after a “ready, willing and able buyer” has been found. Why does the broker rarely collect this money that they have legally earned? The best way to do well in real estate is to have a stellar reputation, and when brokers collect money for a house that was never sold, they’re not doing their reputation any favors. What’s more, it will usually take a lawsuit to collect that commission for a sale that never closed, and between the legal fees and the additional damage that will cause a reputation, it’s just not worth collecting that commission.

The last thing to know about a broker’s commission is that it’s very common that the broker will not keep the entire commission, but will need to split it with other brokers, usually with a buyer’s broker. Again, there is no set way in which this split would happen. It’s a point of negotiation where the split must be agreed upon before any deal can be finalized. Oftentimes, a brokerage will have a policy for how much it offers in a split commission, although again, these are generally guidelines and are dependent on the specific deal.

Let’s take a look at an example of a how a commission split would work out. Let’s say that a seller’s agent and buyer’s agent have worked together and closed a deal on the sale of an $820,000 house. Both have a 50/50 split with their respective brokers. The seller’s broker had settled on a 6% commission in the listing agreement. This means that the full real estate broker commission the seller will pay is $49,200, which they pay to their broker. The seller’s broker now must pay the buyer’s broker $24,600, and also they will pay their salesperson $12,600. Once the buyer’s broker has collected the $24,600, they will pay their salesperson $12,600.

Which of the following is a requirement for broker in charge eligibility in North Carolina?

You must be 18 years old and above. You must have a Social Security Number (SSN) You must have a high school diploma or its equivalent. You must have two years full-time real estate brokerage experience within the last five years.

What are the requirements to become a licensed broker in Texas quizlet?

A broker license applicant must have at least four years of active sales agent experience during the five years preceding the date of application. terminate any association with all sponsored sales agents by giving written notice to each sales agent prior to 30 days before the broker applies for inactive status.

What is the role of the broker quizlet?

A BROKER USES A CLIENTS MONEY OR COMMINGLED FUNDS FOR HIS OR HER OWN PURPOSES. A BROKER MIXES CLIENT MONEY WITH HIS OR HER FUNDS, EITHER BUSINESS OR PERSONAL. REAL ESTE BROKERS CAN PROTECT THEMSELVES AND THEIR CLIENTS FROM ANY LOSS OF RECORDS DUE TO THEFT, VANDALISM, FIRE OR FLOOD.

Who does the selling broker represent quizlet?

An agent is a licensee who represents one or more parties to the transaction, binding the entire firm to the representation. Because the broker is the agent, the broker represents the client.