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How Do Minnesota Realtors Get Paid?

Most people are aware of the fact that when they use the services of a Realtor to sell their real estate property, as a seller, they would have to give the Realtor a commission if the said real estate property is sold. Did you ever wonder how it can be possible for a Realtor to make money when they represent the buyer for free?

The answer is simple. Realtors get paid on every transaction.

This is how it goes…

When a person decides to sell his property, also known as SELLER, he will ‘hire’ an SELLING AGENT. The Seller and the Selling Agent will get into an agreement about the commission that the Seller will pay to the Selling Agent. The usual commission is 6%.

The Buyer of the property normally has a Buying Agent. This Buying Agent will get a portion of the commission of the Selling Agent. The usual amount that is given to a Buying Agent by the Selling Agent here in Minnesota is 2.7%. That leaves the Selling Agent with 3.3% of the 6% commission.

The commission paid to the Selling Agent may seem like a large amount, but there are numerous expenses that a Selling Agent assumes in order to make a sale like the following:

  • Signs posted in the front yard
  • Taking photos of the home
  • Creating and printing flyers
  • Stocking and distribution of flyers
  • Placing the house on the MLS listing
  • Having special features like digital-photo frames
  • Giving neighborhood tours
  • Giving virtual tours
  • Showing panoramic views
  • Internet advertising
  • Print advertising
  • Staging consultation
  • Lockbox home warranty
  • Staffing any open houses
  • Desk fees

As well as the other related expenses incurred in getting these things and more, will bring a Selling Agent’s amount spent to generate a sale from anything for a couple of hundred dollars to a few thousands, depending on what service that agent will use.

When it comes to the bottom line, the Selling Agent will be able to only make a profit from the commission that he gets from the Seller after expenses.

The Buyer’s Agent will have to spend on transportation, communication and documentation. Buying and Selling Agents have to pay a fee for each transaction to the brokerage like Re/Max, Edina, Coldwell, Keller Williams, ect. – that holds their license and also to a broker who can get up to as much as 50% or more of that commission, depending on how the Agent got the client.

It may seem that being a Realtor is an easy and high-paying job, but after all the commission has been spread out, it is not always the case.

Here is a quick list to show where the 6% commission of the Selling Agent goes:

  • The Selling Agent works for A Realty and the Buying Agent works for B Realty.
  • 6% Selling Agent – 2.7% Buying Agent = 3.3% Selling Agent
  • 2.7% Buying Agent – B Realty fee – Brokers portion
  • 3.3% Selling Agent – A Realty fee – Brokers portion
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