How Real Estate Agents Get Paid

Some home buyers and home sellers become apprehensive when deciding to work with a realtor® because all they are thinking about is the money it will cost them.  However, most of the time, believe it or not, a real estate agent will save you money.  Below I will explain how real estate agents get paid.

To start, unlike many other professionals, real estate agents are not paid by hour.  Instead, they are paid by commission.  The commission is based on the sales price of the home and they only get paid once the deal is final and closed.  Although commission is negotiable between listing agents and their clients (the sellers), the typical commission is 6% of the sale price.  In some cases the commission is split equally between the buyer’s agent and the seller’s agent.  However, more commonly you will see the seller’s agent’s commission a bit higher.  This offsets the listing agent’s expenses for marketing the home and holding events such as open houses.

Now, who pays the commission?  The sellers do.   The total commission is paid out of the proceeds of the home sale after the deal has been finalized and closed.  Sometimes this can take a couple months.  Conversely, although the seller is the one who actually pays the commission, one can be assured that they took this into account when determining the listing price of the home.

All realtors® work at real estate brokerages.   Commission payments go to the real estate brokerage where the realtors® work.  The commission is then split again between the realtor and the brokerage.  The amount depends on their agreement.

The percentage of commission paid should always be in the listing agent’s contract with the seller.  This ensures that the realtor® will get paid when the home sells.    Buyer’s agents also usually have a contract with their clients called a buyer agreement.  This ensures that their real estate agent will get paid when they purchase property. However, the percentage is always determined from the seller’s contract and the amount is based on the sale price of the home.

If you have any additional questions about how realtors® get paid and how commissions work, please don’t hesitate to contact me.

Sincerely,

Astra Mulawka
Sales Representative
Better Homes and Gardens
Real Estate Signature Service