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Definition, How Agents Work, Compensation

What Is a Real Estate Agent?

A real estate agent is a licensed professional who arranges real estate transactions, putting buyers and sellers together and acting as their representative in negotiations. Real estate agents usually are compensated completely by a commission—a percentage of the property’s purchase price—so their income depends on their ability to close a deal. In almost every state a real estate agent must work for or be affiliated with a real estate broker (an individual or a brokerage firm), who is more experienced and licensed to a higher degree.:51

KEY TAKEAWAYS

  • A real estate agent is a licensed professional who represents buyers or sellers in real estate transactions.
  • A real estate agent usually works on commission, being paid a percentage of the property’s sale price.
  • In most states a real estate agent must work through a real estate broker, firm, or fellow professional with more experience and a specialized license.
How a Real Estate Agent Works

Real estate agents usually specialize in either commercial or residential real estate. Either way, they perform different duties, depending on whether they work for the buyer or the seller. Agents can or will advise clients on how to price the property and prepare it for a sale, including providing tips on last-minute improvements that can boost the price or encourage speedy offers. Agents market the property through listing services, networking, and advertisements.

Agents will also help search for available properties that match the buyer’s price range and wish list. These agents often look at past sales data on comparable properties to help prospective buyers come up with a fair bid.

Agents act as go-betweens for the principal parties, carrying offers and counteroffers and other questions back and forth. Once a bid is accepted, agents continue to work and help their clients through the paperwork, conveying communications, advising on inspections and moving, and generally shepherding the deal through to closing.

It’s important for consumers to understand whether a real estate agent represents the buyer, the seller, or both parties; obviously, the agent’s loyalty can greatly affect several details of the transaction, including the final price. Laws regulate whether an agent can represent both parties in a real estate transaction. Agents must disclose their representation, so that buyers and sellers are aware of any conflicts of interest.

Real Estate Agents’ Compensation

Traditionally, an agent is paid a commission that is a percentage of the property’s sale price. The more the house sells for, the more money an agent makes. Some agents charge a lower commission for more expensive houses, and some handle the entire transaction for a flat fee that’s much less than a regular commission. Other companies offer a fee-for-service pricing structure that lets sellers pay only for certain parts of the sale process, such as adding the property to a multiple listing service (MLS).

You may have heard people use the terms “real estate agent,” “real estate broker,” and “realtor” interchangeably. While overlap among the three definitely exists, there are key differences.

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