How Brokers Get Paid?
By Jim Palmer Jr.

After spending several decades in the real estate profession as a Designated-Managing Broker/Owner, I’ve heard a lot of interesting comments from folks who seem to be largely ignorant of how brokers get paid.  Real Estate Brokers are sort of like a Chinese doctor, if the patient doesn’t get well they don’t get paid.  In other words, if a transaction fails to close the broker comes away empty handed.  It is customary in most U.S. markets that brokers do not get paid a wage or salary from their company like an employee, but instead they work on a commission basis only, as independent contractors. 

Across our modern society, the public has gravitated towards this commission based, pay-when-it- closes system, even though some practical thinking  brokers have attempted to develop fee-based business models where they get paid when they work, for the hours they work, like most normal 9-5 jobs.  However, consumers in this free-market system have overwhelmingly gravitated towards a commission based pay system for brokers because they don’t want to pay out-of-pocket for those services.  They would rather pay more for brokerage services so they can extract that pay from the equity generated by the sale of property.

“You’re just in it for the money”, I’ve heard many times through the years, as if working for money is a bad thing.  I’m not sure why other people go to work every day, but for me, yes, I do it for the money so I can support my family just like other hard working professionals in varied occupations across the world. Don’t get me wrong, most of us get great satisfaction from helping someone find a home, but doing it for free just wouldn’t make momma happy.

“You’re pushing for a quick closing just so you can pocket a quick commission!” was an accusation levied against a broker recently.   Folks, nothing happens quickly in real estate!  Brokers routinely work for many hours and days before a transaction originates and then wait and wait for their earned pay that only comes if that transaction actually closes. 

Brokers have been accused of listing too high so they can get a larger commission or listing too low so they can make a quick sale.  These types of wild accusations are largely fueled by ignorance and misplaced emotion.  The truth is that most brokers are hard working honest people and are worth what they get paid.  There are a few bad actors, but legit public scrutiny causes them to be weeded out quickly.