How Real Estate Agents & Brokers Get Paid: Assisted Living Tips
Oct 04, 2024
When starting to purchase an assisted living facility, it is vital to understand how real estate agents and commercial brokers are paid. This knowledge is important because it allows you to understand the value and cost-effectiveness of working with these individuals. Real estate agents and brokers are often compensated through commissions, which are often a percentage of the property's sale price. This incentive system aligns their interests with yours since they want to assist you get the best deal possible.
Working with a real estate agent or broker provides valuable knowledge and contacts. Their extensive market knowledge and access to a professional network can help you save time and money. They negotiate the complexity of property transactions, resulting in a more efficient purchasing experience for you. By harnessing their expertise, you may make more educated decisions, avoid potential pitfalls, and ultimately accelerate your path to owning a profitable assisted living facility.
Check out the video, too:
Why Understanding Agent and Broker Payments is Crucial
Establishing a relationship with a broker can greatly simplify the process of discovering and acquiring a property that meets your investment goals. In this blog, we'll explain how these specialists are compensated.
How Real Estate Agents Get Paid
Negotiable Commissions
Agent commissions are flexible and usually vary from 5% to 6% of the buying price. The seller pays these commissions from the sale proceeds at closure. As a buyer, you are indirectly paying these costs, which are deducted from the agreed-upon purchase price.
Commission Breakdown
Commissions are typically divided between the buyer's agent and the selling agent. For example, in a $1 million transaction with a 6% commission, both parties would receive 3%, or $30,000.
Agent and Broker Split
If a broker works with a brokerage, they may have to share their commissions with their brokerage. For example, if a broker gets a $30,000 commission, they may keep $15,000, with the remaining $15,000 going to the brokerage.
Playing Both Sides
Sometimes, a broker can be on both the buying and selling sides of a transaction. In this case, brokers can earn commissions on their own transactions without dividing them. If a broker handles both sides of a $1 million transaction, they may get the whole 6% commission, which amounts to $60,000.
Summary of Payment Structure
- Agent Commissions: Typically 5-6%, negotiable, paid by seller’s proceeds.
- Commission Split: Divided between the buyer’s agent and listing agent.
- Broker-Brokerage Split: Brokers may have to share their earnings with their brokerage.
- Broker Commissions: Brokerages earn from their brokers’ deals and their own transactions.
Why This Matters for You
Understanding this payment structure allows you to assess the value and cost-effectiveness of dealing with a real estate agent or commercial broker. Their knowledge and contacts can save you time and money, making the purchasing process more efficient.
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Show full transcript 👇
Transcript
00:00:01
[Music] hey guys welcome back to assisted living investing happy to have you on the channel today i'm brandon gustafson and i own and operate two assisted living facilities out of state and i've created this channel to help you kind of learn the process and what it's like to to own and operate a facility and walk you through the steps and and help you get a better understanding of what it's like to process of purchasing your own facility i would love to have you uh give me a big thumbs up like the like
00:00:42
the videos and and subscribe down below um so that you can get subscribe and ring the bell uh so you get notified of content as it comes up and and leave comments down below so the rest of the the group can can also kind of learn from you and your experience and and gain some greater knowledge i'd also encourage you to join me on assistedlivinginvesting.net would love to see over on the website where i have some free resources uh newsletter blog and kind of get a lot of this information out there in written form so
00:01:12
you can kind of have those as resources as you go through the process and purchasing your own assisted living facility and getting into into this world of of investing in our last video we talked about why you should be working with a broker why you should be working with a real estate agent specifically as a buyer why why you would want to do that and the great advantages that come from that as i mentioned in that video working with a broker and developing a relationship with a broker is going to
00:01:39
be key and helping you be successful and finding a facility that that will kind of meet the needs that you have and helping you get through the process of of purchasing your own facility and get to the point where you're now operating that facility today we're going to be talking about how do real estate agents and brokers get paid what's that like how much do they get paid what is how does it all work and what that process is like just to give you some transparency on what it's like so that you know going
00:02:08
into it that these people they they do get paid um they get paid very well for the work that they do uh but they're they're very skilled in what they do and so they're just gonna want to give some some transparency there so number one how does payment work the first thing you want to know is it's important to know that agent commissions are are actually negotiable um as as you're kind of working through things a lot of times on a listing especially if it's just kind of single family
00:02:34
homes residential homes that you're you're purchasing for yourself or whatever they'll kind of put in there what those commissions are going to look like but you know negotiate those those commissions are negotiable typically they're going to fall between five and six percent of of the purchase price is is just kind of a good benchmark for it to be commissions are paid from the proceeds of the sell by the money that the seller receives at closing so you as the buyer um you know yeah you're
00:03:00
purchasing the the facility you're purchasing the real estate the business and all of that so indirectly you are paying them um but directly none of the you don't have to pay an additional you know three percent or six percent or something like that on top of um the purchase price that you've agreed to those funds come directly out of the the purchase price and they come from the seller at closing on the deal now commissions are typically divided up between a buyer's agent and a listing
00:03:29
agent um we talked about that a little bit in our last video the difference between those those two uh listing agent a buyer agent um and and how they work but those commissions are typically going to be divided up um amongst those two groups so for example if a commission is set at six percent then three percent of that amount is going to go to the buyer side and three percent is going to go over to the seller side to the to the listing agent now if an agent is working for both the buyer and the seller which is a
00:03:59
situation that could happen then they would take that full commission amount it's kind of how that works so in a transaction with a purchase of a million dollars let's just make this really simple math let's say you're buying a facility you're purchasing it for one million dollars the buyer side is going to typically receive three percent of that which is thirty thousand dollars and the seller side is going to typically get three percent of that which is thirty thousand dollars um so each of those
00:04:26
sides are going to get that amount of money um you know you can do the math on i tried to make this simple so you can see what those numbers look like but that's the numbers that are going to go to there so payments that go to a real estate agent i'm going to kind of break this down by real estate agent versus brokers so they can kind of get a feel for how those people are making money an agent is going to split the commission on the deal with the brokerage that they're working with so whether it's you know an
00:04:49
agent and they're on the buyer side or the seller side they're going to take um they're going to split that commission and they kind of determine what that's going to be in-house and and how those things are split so i'm not going to get into that um but if their side ended up getting three percent of that transaction we've been talking about you know that one million dollar transaction um the the buyer side gets a three percent cut of that so that's thirty thousand dollars
00:05:13
the agent that you're working with gets fifty percent of that commission so the end of the deal they receive fifteen thousand and the broker um is gonna also get fifteen thousand dollars that's kind of how the agent um side of things works that that's what the real estate agent is is gonna get um as far as payments for brokers brokers are kind of paid in in two ways um so first off get um a cut of the commissions brought in by the agents like we just talked about um that work under them so you know using this case
00:05:44
that we talked about um where it's a million dollars the the buyer side gets gets the thirty thousand dollars the real estate agent gets 15 um thousand dollars of that the broker is getting that remaining fifteen thousand dollars so they they get to take a cut of that because those agents are working underneath um their brokerage license so they're they're bringing in a lot of deals and things like that they also get commissions they also get paid commissions on their own deals but as a broker um since they're not the
00:06:13
agent you know they're a managing broker or or an associate broker or principal broker like we talked about in our last video um they don't have to split the commissions on that deal they get to keep the the full amount so in the example that we've been kind of talking about that 30 000 commission check goes to them and and they get to keep it you know there's taxes and fees and things that are going to be involved with that so it's not like a straight um full amount but that kind of gives you an
00:06:42
idea of about how much they're making on that now broker representing both sides of that transaction would earn the full amount of the commission so you know in that case the deal that we've been talking about that would be a sixty thousand dollar commission check so that's that's a pretty good one i i think in often times you're going to have a broker that's kind of doing both sides of that deal it's probably going to lower that percentage a little bit you know maybe they put it at five
00:07:08
percent rather than six percent so they get 50 000 rather than 60. but it just kind of depends on on the brokerage how they have things set up and what that's going to look like so that's kind of the process that that you'd be looking at as far as how those brokers how those agents are getting paid uh and more than anything this is just a video to kind of give you transparency into how that works and what it looks like for how a broker gets paid so just quick recap how do brokers get
00:07:34
paid we went over how payments work payments to real estate agents specifically and then payments on the broker side so you can kind of get a feel for what those payments look like and and the amount of money that those people are earning and then just remember you on the buyer's side are not paying those commissions um directly you pay for the the purchase price of that you've agreed on with the seller to purchase the real estate and the business and then from those proceeds of the sell
00:08:04
that the seller receives um those commissions are paid off to the agent and the broker so that's kind of how that works next time we're going to get into the process of working with a broker what's what what is it like to work with a broker we've done a lot of background on who brokers are who agents are um you know how they get paid why you should work with one next time we're going to get into the process of actually working with a broker so you kind of know what to expect is as you're
00:08:28
reaching out to these people um starting to develop relationships and what that's like and why you should do it um so just a reminder make sure you like the video give me a big thumbs up uh comment down below any you know interactions that you've had um you know working with brokers and and share that knowledge with other people subscribe and hit that notification bell so you get notified every time i put new content out here follow me on my all my other social media platforms and i'd
00:08:53
love to see you over on assistedlivinginvesting.net for free resources the newsletter blog future content everything i'm going to be putting out on that website would love to see you over there and just in closing remember it doesn't take a lot just just a little bit keep going just keep making progress inch by inch and you'll be fine you'll be able to make it through this and everything will work out for you so thanks for watching today and we'll see you next time [Music] you
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