Most real estate agents are paid entirely by commission. Commissions are usually

Question

Most real estate agents are paid entirely by commission. Commissions are usually paid by the person whose property has been sold, and it is normally calculated as a percentage of the sales price. Roughly half of the commission goes to the agent and half to the broker for whom the agent works.

a) What is the likely connection between this compensation scheme and the fact that brokers never lay off their agents?

b) Some real estate brokers split the commission revenues generated by each sale with the responsible agent, as described above. Other brokers, however, require their agents to pay them (the brokers) money upfront, and then allow the agents to keep the entire commission from each sale they make. Which agents would you predict to have the larger volume of sales, those who split all commissions with their employer or those who pay an upfront fee to their employer and then keep the entire commission?

Labor Economics

ECN 451

Thank you

Explanation / Answer

a. when the brokers were paid by the agents interms of commission on sales, the brokers works to find higher value of sales to get more amount of income for them. if the percentage is more the broker will gets more, for that he may works more harder and looks for more return and vice versa.

b. paying some amount in advance to the brokers and later pay the commission on sale; this method is good to the broker as well as agent. of course agent may pay a little higher amount to the broker, but if there are more slaes, the agent reputation and goodwill also increase in the market. it will be resulted in a positive way to the agent. so, in my view paying upfront commission and make them work will give better results.

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