How Do Minnesota Realtors Get Paid?

Most people understand that when they go to sell a house and they choose their Realtor - that that Realtor gets a percentage of commission from the sale - but buyers appear to have Realtors that represent them (seemingly for free) - so how do they make their money?

The answer to that is quite simple - Realtors get paid on every transaction.

Here's how...

We'll say Steve-Seller is selling his home - and Bonnie-Buyer is the one who wants to buy it.

Steve-Seller has already negotiated a percent commission with his agent at the time he "hired" him (for this example let's say it's 6% of the sale price). But Bonnie-Buyer (who made an offer on the house to try to purchase it) has an agent too - who gets paid a portion of that 6% that Steve-Seller is paying his agent.

Here in Minnesota, this amount is usually around 2.7%...

So Bonnie-Buyer's agent gets 2.7% of Steve-Seller's agent's 6%. So essentially - Steve-Seller's agent actually gets only 3.3% commission at the end of the day (since 6% - 2.7% = 3.3%).

That can seem like a lot of money for a seller to part with (that's $6,000 for a $100,000 home) but there are many other factors that the general-public never get to see (or hear about) that go into that amount!

For example: The selling-agent pays for (out of his/her own pocket) all fees associated with the following sales/marketing costs:

• Getting the sign posted in the front yard

• Photos of the home

• Creating and printing flyers

• Keeping the flyers stocked

• Getting the home on the MLS

• Any special features like digital-photo frames

• Neighborhood tours

• Panoramic views

• Virtual tours

• Internet advertising

• Print advertising

• Staging consultation

• Lockbox home warranty

• Staffing any open houses

• Desk fees

As well as many other variables which can run from a couple hundred to many thousands of dollars - depending on the services included with that agent.

So at the end of the day - if Steve-Seller's agent gets the 3.3% commission - and he is actually keeping a lot less overall because of his expenses.

The buyer's agent's expenses are measured in the gas, time, and a lot of paperwork. In addition - each agent (selling and buying) typically has to pay fees to their brokerage (Re/Max, Edina, Coldwell, Keller Williams, ect. - whoever holds their license) for each transaction - and also to a broker who can take 50% or more of that commission - depending on how the agent got that client.

So at the end of the day - although it might look like being a Realtor might be an easy high-paying - it's not always as cushy as one might think.

Here's a brief diagram showing how and where that money travels using our 6% example:

• Steve-Seller's agent works for Edina Realty and Bonnie-Buyer's agent works for Re/Max

• Steve-Seller 6% » Edina Realty » 2.7% » Re/Max » portion of the 2.7% » Buyer's Agent

• Re/Max » portion of the 2.7% » Buyer's Agent's Broker

• Edina Realty » portion of 3.3% » Seller's Broker

• Edina Realty » portion of 3.3% » Selling Agent