Dear Heather,

I have a lot of friends in the real estate industry and I have a property to sell. I don’t want to “play favourite”, so can you help me by explaining how real estate agents get paid?

Seller

Dear Seller,

If you are a home seller you are wise to work with a real estate agent who will not only guide you on price, but handle the marketing, showings, offers, contracts, negotiations and a whole host of other things that go towards making a successful real estate transaction.

Unlike other professionals who bill their clients at hourly rates, real estate professionals are paid at the end of a sales transaction.

If a real estate agent works with a seller for weeks or months (sometimes years) without a resulting transaction, they aren’t paid for their time.

Agents earn a commission based on the sales price of the home and receive that commission only after the transaction closes.

This provides them with the incentive to get the best possible price in the least amount of time.

Commissions in Bermuda are five per cent of the final sales price, which is recommended by the Chamber of Commerce and pretty standard across the board.

The exact percentage of the commission is always spelled out in the listing agent’s contract with the seller. In Bermuda, the total commission is generally paid by the seller at the settlement table, where the fee is subtracted from the proceeds of the home sale. Sales can be held up by such things as tenant issues, financing issues, title issues, immigration issues, planning issues, etc.

The agent will not get paid until the transaction closes, so once they have sold a property it can take a few months to be paid or, if there are problems, it can take a year or longer. In most cases the commission is evenly split between the agent that introduces the buyer and the agent representing the seller.

So in the case of a five per cent commission, each “side” receives 2.5 per cent.

However, this does not go directly to the sales agents, but to their company. This helps pay for things such as back office assistance, websites and office support; real estate agents are paid a portion of these commission earnings. For example, if you are the listing agent the office will get 2.5 per cent, the agent will most likely receive half of this, so a total of about 1.25 per cent of the sale price.

This is obviously subject to deductions such as health insurance, pensions and government taxes.

At the end of the day if your agent lists your $600,000 home and it sells for that price, their approximate take home pay is $6,000. So you can see that in order to make a respectable living an agent would have to list or sell 10 to 12 such houses in a year.

If you are a seller, engaging the professional support of a real estate agent who represents your interests should be worth every dollar and cent of the commission.

Many studies have proven that real estate agents can secure a better price for you than if you try and sell property on your own, as buyers buying directly from the seller know that they are not experienced in negotiations and will try and get a “deal”.

Sometimes friendship and business do not mix well, so if you want to be fair to all your contacts in the real estate industry you may want to list your property with a different agent, based on their listing presentation and reputation for being knowledgeable in their field. All your friends who are agents will still have the opportunity to sell it.

•Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 27 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate