Idaho Real Estate Practice Exam

Which of the following is true regarding how agents are compensated for their work?

1. They receive a salary from the state

2. They are paid from their broker

3. Clients pay agents directly

4. Commissions are split evenly with all brokers

The correct answer is: They are paid from their broker

Agents in the real estate industry typically operate under a commission-based compensation structure, primarily being paid by their brokers. This means that agents earn a percentage of the commissions derived from the transactions they facilitate, and these commissions are initially paid to the brokerage. The relationship between agents and brokers is significant in this context. The broker provides support, office resources, and the legal framework under which agents operate. Consequently, while agents do earn commission for sales, they do so through the broker, who may then distribute the agreed-upon percentage to the agent after deducting their share. This structure allows agents to focus on client relations and sales activities, while brokers manage the business and legal aspects of the transactions. In contrast, agents do not receive a salary directly from the state nor do clients typically pay agents directly in exchange for their services without the brokerage's involvement. Additionally, commission splits among brokers can vary widely based on agreements and are rarely even splits, as they take into account the experience of the agent, productivity levels, and the services provided by the brokerage.