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Question:

How do real estate companies make money?

How do real estate companies make money?

Answer:

If by company you mean the office for which a broker or sales agent works read the following: When a house sells, the agent who listed the house and represents the seller gets a portion of the commission and the agent who brought the buyer to the transaction gets the other portion. Sometimes the agent who lists the house also sells it [has a buyer] but increasingly buyers are told to get a buyer's agent to avoid conflict of interest. Laws and practices vary by state. The commission is agreed upon at the time the listing is taken. Generally the seller pays it from the proceeds of the sale. It can be renegotiated later if the selling price is lower than asked or if the price is bid up. For example a listing will indicate commission is 6% of the selling price split 50/50 or 40/60 between the listing broker/agent and the buyer's broker/agent. The split depends on market conditions - is it a buyer's market or a seller's market. If it is a seller's market that means houses to sell are in short supply making a listing a valuable thing and the listing broker or agent may, but not always, get a larger split of the commission. The portion of the commission that goes to the respective sides is split again. Take the case of a Century 21 office. A portion goes to cover the franchise fee i.e.; goes to C-21 corporate, a portion goes to the broker who manges/owns the office [company in your question] the selling agent is associated with, some may go to cover special advertising or printed materials and the rest goes to the broker or sales agent who found the buyer or took the listing. That is an over view of the process.
There is a fee to list your home for sale with a real estate company
simple math. Let's guess that an agency represents buyers or sellers [horribly some do both on a single deal] on 100 deals per mo. And let's assume the average deal generates a commission of $8,000. LEt's further assume that 1/2 of that goes to the listing agency and 1/2 to the buyer's agency. thus, we take now 8k and divide by 2.......4k per deal the office overhead is 3k a mo. 4k x 100..........4,000 x 100 = 400,000. the agent will be either on a split of 50-50 or close to that or he will pay a desk fee of about 700 per mo and he will get 100% of his part of the closing commission thus, of the 400,000, the agency will keep at least 50k. PER mo. 3k rent he pockets 25k a mo not bad can guide further
or perhaps a fireworks retail chain wants to open up in town and the real estate company owns the property they are after? who knows

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