Frequently Asked Questions about Real EstateThis section is intended only to improve understanding of how real estate professionals and transactions work. No representation is made as to completeness or accuracy of answers. For any legal or tax questions, you are encouraged to consult a licensed professional. All information is based on real estate practices in Virginia. Email your questions to me, Marolyne Nabors |
How do you get a contract of sale on a property?
Don’t realtors make a lot of money? I’ve heard about commissions like 6 percent.
What is the difference between a realtor and a real estate agent?
Is a broker different from a realtor, or real estate agent?
Realtors cannot all be in the office all the time. There is usually not enough work space, but, most importantly, we need to be elsewhere quite often. We have appointments to show property or take listings. And we attend classes and seminars, go to closings, take care of listing and closing details, preview properties for clients. Sometimes, we actually take a day or two out of the 7-day week for our own use. Many of us do a large amount of our work from the home office when not occupied with floor time and other commitments.
An agent's floor time is that time when the agent is scheduled to be in the office and attending to phone calls and walk-ins. In general, especially with small firms, the agent "on the floor" is the one who will take the listing for a seller or show property for a buyer. In short, the agent on the floor gets any business that develops during that time in return for covering the office. This scenario can vary, but that's the simple version. Often people are surprised to stop in a real estate office and find that "their agent" is not in. Well.... an agent who is in all the time is also not out there taking care of business. It's a very good idea to give your agent some warning if you plan to stop in.
"Listing" is realtor-speak for "property for sale." If I "list" a property, I create a contract with the owners agreeing that I will promote the property for sale. The contract will include all of the required details such as price, beginning and ending date of agreement, commission, and special terms.
How do you get a contract of sale on a property?
The buyers decide how much they want to offer, how they will pay, what contingencies there are, and other special conditions or requests (like which items in a house they want included). Their agent fills in the contract form. Buyers review it and sign and date it. Their agent then passes the offer to the sellers' agent who presents it to the sellers. Law requires that all offers be presented "immediately." The seller can do one of three things:
1. Like it and sign it.
2. Not like it and make a counter-offer. This usually applies to price but may also be about some other feature (OK, but you can't have the chandelier). They cross through the item to be changed, write the change and initial it and pass it back through to the buyer. When agreement is reached, the seller signs it.
3. Reject the offer without making a counter-offer.
Once the sellers have signed the offer, it becomes a contract and is the blueprint for the sale.
Anyone whose name will be on the deed must sign as buyers. All owners must sign as sellers. Sometimes a property is in an estate with many heirs and all must sign.
The buyer pays for the closing and so chooses the closing agent. This is either an attorney or a title company. It works better if the closing agent is in the county where the property is located. A closing date is chosen that allows time for such things as: title search and other things the closing agent has to do; any testing that needs to be done; arranging financing; survey, if needed; or other requirements.
GRI stands for Graduate, Realtor® Institute. It is a nationally recognized designation that is achieved by completing 90 hours of real estate instruction above and beyond the education required for licensure. The candidate attends 12 one-day classes, often traveling to distant locations. Topics include professional standards, legal liability, construction, appraisal, financing, and real estate investing and taxation. I started working on the GRI soon after I got my real estate license because I realized how much there is to know and understand in order to be a true professional.
The short answer is: Nothing.
Although there are exceptions, the typical realtor is not paid a salary or an hourly wage. The realtor works as an “independent contractor.” The only money that comes in is commissions. Commissions are paid only when the sale of a property is final, the new deed is recorded and ownership transfers to the buyer.
A realtor earns commissions in two ways: (1) As the listing agent, the one who contracts with an owner to sell a property. The percent commission is written into the contract. (2) As the selling agent, the one who shows a property to a buyer and writes a contract of sale for that person(s). The selling agent may be with the same company as the listing agent or with some other.
Most of the time, the listing agent is not the agent who ultimately brings the buyer. The listing agent’s function is to promote the property, through ads, websites, and the MLS so that both the public and all other agents can know about it. So, typically, the commission is split in half. The agent’s broker gets a portion of that half, roughly 35-50% of it.
Example: You contract with Jane Doe of Company A to list your house for $100,000 for a 6% commission. After many showings by many different agents, including Jane, Joe Blow of Company B gets a full-price offer from a buyer. They write it up, all parties sign, and the closing happens 6 weeks later. The closing agent sends company A’s half of the commission to Jane’s broker. The broker retains the usual, for example here, 40% and writes Jane a check for 60% of $3,000. Jane receives $1,800.
This helps to answer the next question.
Don’t realtors make a lot of money? I’ve heard about commissions like
6 percent.
Look at the above example. Even if the agent who lists a property also sells it and so earns both halves of the commission, the brokerage gets a sizable portion of the commission. Of course! Commissions are the only source of income for both the agents and their companies. (There are other minor sources for some companies, but not for most.)
One source stated that the average gross income for a first year realtor is $14,000. Gross means before expenses have been deducted. Those expenses add up to thousands a year: Association dues, MLS memberships, error-and-omissions insurance, long distance calls, cell phone, advertising, vehicle mileage, supplies, equipment.
Another source gave the average net income for years 1 through 5 as $18,000. Net means after expenses are deducted. Could you support your family on $18,000 per year?
One can do well as a realtor, but only after years of effort, experience, and continuing education. If a realtor is doing her job well, she will get repeat business and referrals. That is, former clients will use her again the next time they need a realtor and will recommend her to friends. Some realtors, after years of experience, will get a broker’s license and start their own firms. This can increase income, but there is also the expense and risk involved in owning a business.
So, no, we are not all getting rich. We are pretty much just working people doing a job we really love.
What is the difference between a realtor and a real estate agent?
None. The two are just common terms for anyone licensed to practice real estate. If you see the word realtor spelled with a capital letter and a trademark symbol, that indicates that the person is a member of the National Association of Realtors. Members must adhere to a strict code of ethics and also may use and access their local association's MLS. Other common terms for realtors are "real estate salesperson" or "sales associate." These terms are not very descriptive, since they do not reflect a primary function of the realtor: listing property for sale.
Is a broker different from a realtor, or real estate agent?
Yes. To become a broker, a person must first obtain a basic real estate license. In Virginia, to obtain a broker's license, a person must have worked at least 3 of the last 4 years as a full-time licensed realtor, taken and passed 4 courses on aspects of brokerage, and passed the state licensing exam. A broker can take a higher level of responsibility. Every real estate firm must be directed by at least one broker, either an owner or someone hired by the owners. These are called "principal brokers." Every branch office of a firm must be directed by a "supervising broker." Many people obtain the broker's license but continue working for a firm in the usual capacity of realtor, listing and selling property. People who hold a broker's license but are not directors of the firm in some way are usually referred to as "associate brokers."
______________________________________________________________________________
|
For more information, contact Marolyne Nabors 276-952-1870 Agent for Dee's Country Places Realty, Meadows of Dan and Stuart, VA -- Licensed in Virginia |