How Agents Get Paid: Understanding Your Options (Part 2)

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By: Darin "Sid" Cameron, CRS
Thu, Oct 19th, 2006 10:23 pm

This is a continuation of yesterday's post...

Limits! What Limits?

The real estate industry gives you freedoms that other industries just don’t have. Even though many agents focus on a specific geography to sell in, there are no requirements to do so other than to be licensed or registered with the appropriate governmental agencies.

As such, I have met several agents who sell homes in the St Louis area during the week and at the Lake of the Ozarks on the weekend (Lake of the Ozarks is a vacation community roughly 2-3 hours outside of St. Louis). Because both towns are in Missouri, and a lot of the lake buyers are out of St. Louis, it works for all parties.

I have also met “snow-bird” agents who sell homes in Missouri during the summer and Arizona or Florida in the winter (they are licensed in both states). In this case, their specialty in the winter is to work with Midwesterners looking to buy that winter home (and they had a partner back in Missouri to work with clients over those winter months while they were gone).

There was even one agent I ran into who had listings in both Kansas City, MO and St Louis, MO- towns which are 250+ miles apart. Don’t ask me how they accomplished it or why they were doing it, because it’s still a head-scratcher for me. But all that matters is that it works for you and more importantly your clients.

Full vs Part-Time Agents

This brings us to the other major aspect of agent compensation that makes every individual unique- many agents perform other tasks besides selling properties.

Thanks to that independent contractor status we discussed yesterday, it is quite common for agents to have a full-time or part-time job outside of the real estate industry and only sell homes on the side. For example, I know an agent who is a full-time medical sales representative who does that. New agents may also maintain a job on the side in order to stabilize their income until their real estate career takes off.

Real estate is also often a “secondary” family income for a spouse or partner that would otherwise be a stay at home parent or spouse. Even though these agents don’t have another income producing job, they may still work less than full-time at real estate. (Usually agents who work “less than full-time” will have a specialty that focuses on family and friends as clients because they don’t have a large advertising budget or the time to handle an extensive marketing plan).

Even full-time real estate people may split their time between real estate sales and other tasks- often to provide a turn-key solution to their clients. In both the commercial and residential space, for example, agents or the companies they work for may provide things like property management services (leasing, renting or maintaining a building after the sale).

Agents may also serve dual hats by being a real estate investor, builder, general contractor, rehabber or owner/worker of some other related business- such as a construction company, appraisal company, a mortgage company, or property management company. In many cases the agent’s sales leads might come from the other side of the business (or vice-versa). The only requirement is that the agent discloses their roles in all of their businesses and follows all state laws regulating both industries.

All of this effects compensation because the “agent” in question isn’t spending all of their time focused on selling properties. On my own sales team, for example, the manager of The St Louis Agent Team’s Investment Division- also runs a small contracting company that paints and lays flooring. Although it might seem to be a distraction from selling, the truth is most investment clients appreciate the fact that he can offer a more “turn-key” solution- and that leads to repeat business. (By the way, this is why real estate is a perfect career for someone with attention deficit disorder…)

Tomorrow’s Installment

Tomorrow we will wrap up this discussion and actually address how commissions are paid out and how much money an agent can expect to make.