Content of the material
- How much commission do Realtors get paid?
- The Commission a Real Estate Agent Charges Will Vary Depending on Their Role
- Published by
- Andrew Te
- Do You Have to Pay a Realtor if Your Home Does Not Sell?
- How much do real estate agents make per year?
- How the real estate agent commission is set
- How Much Do Real Estate Agents Make?
- Does the agent get to keep the full commission?
- Do Real Estate Agents Get Paid Weekly?
- How Much Does a Realtor Make on a Sale?
- What If I Can’t Afford Closing Costs as a Seller?
- Don’t Break the Bank
- Who pays realtors?
- How Can You Increase Your Real Estate Commission?
- Are commission rates negotiable?
- Better real estate agents at a better rate
How much commission do Realtors get paid?
Only a very small portion of Realtors work on salary — the commission model is much more common. Real estate commissions can be negotiated, but they typically run about 5 percent to 6 percent of a home’s sale price. The exact terms of an agent’s commission vary from sale to sale, and can depend on region and which firm they work for.
Here’s roughly what you can expect to pay, based on how much your home sells for:
|Home’s sale price||5% real estate commission|
Realtor commissions are typically paid by the home seller, explains Patrick Duffy, who runs Duffy Realty in Miami. Sellers sign a listing agreement with a Realtor in which they agree to pay a commission fee.
Depending on your state, the buyer may not be responsible for Realtor fees at all. Instead, both the buying and selling agents are paid with proceeds from the sale of the home. These two agents typically split the total commission — so for a 6 percent commission, the selling agent would receive 3 percent and the buying agent would receive the other 3 percent.
That changes in the case of dual agency, when one agent represents both the buyer and seller. Laws about whether and how listing agents can sell the properties they’re representing to buyers vary by state. In a dual agency scenario, pay particular attention to the appraisal to ensure you’re getting a fair price. While agents have a fiduciary duty to their clients, with dual agency, the lines can get blurred.
If working with a buyer’s agent, “you have to sign a buyer’s agency agreement,” explains Tim Noland, a buyer’s agent with Great Mountain Properties in Murphy, North Carolina. “A true buyer’s agent works for the buyer. They protect the buyer’s investment, as opposed to the listing agent, who’s actually working for the seller.”
Real estate brokerages may get a cut of the commission as well. The brokerage brand RE/MAX, for example, has a split commission setup by which its agents receive 95 percent of the full commission from the sale, and 5 percent goes back to the company.
“The broker has to set the policy and oversee, monitor and supervise everything the agent does,” Duffy says. “And if the agent does something fraudulent or unprofessional, the broker gets sued.”
The Commission a Real Estate Agent Charges Will Vary Depending on Their Role
Determining what a real estate agent does and who they work for can be confusing if you just go off of terms and titles – for instance, sometimes the buyer’s agent can be called the selling agent.
The listing agent is the term used for the agent working for the seller.
To ensure you know what you are getting into, ask the agent to clarify who they work for and what they charge upfront.
As a seller, you want an agent working on getting you the highest possible sales price – or a combination of a higher price and other desirable terms, such as selling quickly to move to the closing and buy another home.
As a buyer, you want an agent who will work to get you the best possible deal on the house you want.
Andrew has 7+ years of experience in Real Estate and working with Real Estate Agents. He is passionate about the housing market and solving problems. View all posts by Andrew Te
Do You Have to Pay a Realtor if Your Home Does Not Sell?
More often than not, the answer is no. Real Estate is a performance-based business. Commissions on real estate are usually only paid when the job is done.
The typical real estate contract will have language stating that a real estate agent will only get paid if and when the property closes. Some contracts will have wording that you will owe the agency a real estate commission if a buyer is successfully procured and backs out of the contract.
It is essential to look over the fine print and know precisely what you agree to when signing a listing agreement. There are numerous occasions when sellers will want to fire their real estate agent for lack of performance. Getting out of a contract is not as easy as you think.
The same can be said if you hire a buyer’s agent and sign a buyer’s agency agreement.
How much do real estate agents make per year?
The U.S. Bureau of Labor Statistics puts the median annual wage for a real estate agent at $48,340 — meaning 50% of agents make more and 50% of agents make less.
|State||Per sale||Per hour||Per year|
|District of Columbia||$4,074||$30.97||$64,420|
While most agents work on a commission basis, you can calculate their earnings by adding up their entire take-home commissions over the year.
The typical take-home pay for an agent on a $350,000 home (which is close to nationwide median home value) is $5,250.
Median annual earnings / Average per sale earnings = Total number of annual sales
$48,340 per year / $5,250 per sale = 9.2 sales
Theoretically, a real estate agent needs to complete approximately 9–10 transactions a year to earn the national median income.
To break into the top 10% of agents earning $102,170 or more, you’d need to sell approximately 20 homes per year.What determines a realtor’s earnings?
A realtor’s annual earnings are affected by factors like: Location Number of sales Years of experience Hours worked Local real estate prices Out-of-pocket expensesWhat out-of-pocket expenses do realtors pay?
On top of commission splits, most real estate agents — unless they are salaried — will also need to cover: Transportation to get to and from listings Health insurance Taxes Professional membership fees Marketing costs (signage, photography, business cards, etc.) Continuing education
How the real estate agent commission is set
Realtor Kevin Deselms says the commission percentage is based on several factors. This can include local real estate market conditions.
“But the amount is often based on negotiation between the seller and the listing agent or the agent’s brokerage,” he says.
In other words, the commission is negotiable. And some agents are willing to give discounts, either within the listing agreement or later.
In fact, about three out of five sellers get a discount on their agent’s commission.
“Commission rates have been trending down in recent years,” says real estate broker Matt Buttner.
“This is mostly because of the internet and technology,” he says. “The MLS now automatically syndicates the listing out to real estate websites like Zillow and Realtor.com. So a listing agent’s job is easier.”
Discounts are given for many reasons.
“Say, for example, a client is selling one house and buying another using the same agent. In this case, the agent is more likely to offer a discount,” says real estate attorney and Realtor Bruce Ailion.
“Or say the property is in a hot market and competitively priced,” Ailion says. “It might take less work to sell. That could lead to a discount.”
We used publicly available data from the United States Bureau of Labor Statistics to source information about the annual earnings of real estate agents across the country in 2021.
The salary information in our customized data tables intentionally excludes real estate brokers. Brokers often act as both agents and brokerage managers, so their earnings are generally higher and their compensation structure includes a salary or a percentage of the brokerage’s overall sales.
Average commission numbers and total take home pay were sourced from Clever Real Estate’s 2021 survey of real estate agents in all 50 states.
How Much Do Real Estate Agents Make?
In 2022, Indeed.com listed the annual pay for real estate agents in the $85,597 to $112,309 range, depending on years of experience. The median annual salary was $48,770 in 2021, according to the most recent data available from the U.S. Bureau of Labor Statistics. For brokers, the mean annual salary was $86,490.
Of course, real estate agents and brokers can make much more than that. The highest 10% of agents earned more than $102,170 in 2021, while the top 10% of brokers made $176,080.
Does the agent get to keep the full commission?
Although the seller pays the entire commission, the listing agent (representing the seller) in a transaction doesn’t keep it all. Part of their commission will go toward marketing your property with professional photography, open houses, offline marketing, and more.
The commission is also typically split 50/50 with the buyer’s agent to compensate them for bringing a buyer to the sale and coordinating the buy-side of the transaction. So, around 2.5% to 3% goes to the listing agent, and the other 2.5%-3% goes to the buyer’s agent.
Both the listing agent and the buyer’s agent will then share a percentage of their commission with their sponsoring broker.
These split rates can vary; however, it’s common for the listing agent to give their broker anywhere from 30%-50% of their commission, depending on the agent’s level of experience, their market size, and brokerage agreement.
Do Real Estate Agents Get Paid Weekly?
Most real estate agents do not get paid weekly or even biweekly. Instead, they work without pay in anticipation of earning commissions on the sales they make. These commissions are are paid at closing and split between the brokers and the agents.
How Much Does a Realtor Make on a Sale?
The 5-6 percent commission on a sale is typically split up between two realtors. That means both the listing agent (who represents the seller and is also called the seller's agent) and the buyer's agent will gross approximately 2.5-3% of the sales price. While this may seem like a lot of money, the entire process of finding a house, negotiating a price, and finalizing a sale can take many months, and it may not be nearly as much as paying for the equivalent services on an hourly basis.
Furthermore, agents will need to split this commission with their broker so once the money is whacked up again. Successful real estate agents with a lot of experience will have higher splits, but new agents may only have a 50-50 commission split so the percentage your realtor will be collecting might only be 1.25% to 1.5%. That means that while the seller might be paying a $60,000 fee on a $1 million sale, each agent might only take home a $15,000 commission.
Sometimes, a real estate agent has what’s called dual agency, which means that they are the agent of both the buyer and the seller. Since this conflict of interest is complicated to juggle, most real estate agents don’t put themselves through it. Those who do, however, can earn the entire sale commission by default. It should be noted that dual agency is only legal in some states, and you should be wary of working with a dual agent.
What If I Can’t Afford Closing Costs as a Seller?
If you can’t afford closing costs, you canask your lender or the buyer to help cover some of the cost. On the other hand, you can apply for Down Payment Assistance or a Closing Cost Assistance Grant.
Closing Cost Assistance Grants are specifically available for the purpose of helping low to moderate-income households. To learn more, inquire with a trusted lender for more information.
If a loan or grant is not an option, consider negotiating with your lender to assist you by lowering your down payment on your next house.
The money saved in the down payment should be able to cover your closing costs. As a result, you should expect your mortgage costs to increase.
Don’t Break the Bank
Lastly, if you wish to ask the seller if they are willing to pay part of the closing costs, make it clear that the sale agreement is contingent on meeting this condition.
You may choose to reveal that you do not have the funds for the closing costs and that as a result, have applied for a grant or have spoken with a lender already. However, you’re not required to.
Before facilitating this negotiation, talk to your realtor for advice on how to best move forward.
Who pays realtors?
Traditionally, the seller pays the full commission fee to their listing agent. The specific details of your realtor's commission will be explained in your listing agreement (the contract that you sign with your agent).
From there, the listing agent will split a portion of the commission — typically half — with the buyer's agent. In most cases, both agents share a portion of their commission with their brokers.
🔎 Why does the seller pay buyer’s agent commission? Offering a competitive buyer’s agent commission is an important way to attract attention to your listing. Think of it this way: if you’re planning to pay less than the typical 2.19% to 3.17% buyer’s agent commission, local realtors might be less motivated to show your home to their clients. After all, they’d stand to earn less money from the sale!
How Can You Increase Your Real Estate Commission?
In the real estate business, a real estate agent is in ultimate control of how much they make. A real estate agent can increase their real estate agent commission in a few ways:
- Being both the buyer’s and seller’s agent. If you list a property and then find a buyer for it, you get the full commission, rather than having to split it with the other agent. This is called dual agency.
- Negotiating better rates with your broker. You might need to go to another broker if your current one is too expensive or if it’s just not a good fit.
- Negotiating a higher sale price for your listings. As a seller’s agent, it’s in your interest to make sure your sellers get the best price for their house, every time.
- Selling more houses. Real estate is very much a numbers game. If you can’t increase each individual commission, you can increase your total real estate commission by selling more properties.
- Getting into bigger markets. Waterfront properties and luxury properties are naturally going to make more money for a Realtor, though they may be more of a challenge to sell.
- Providing additional services. A real estate agent can provide services such as home staging for their listings, as well as sell packages such as superior photography and videos.
Your actual commission rate isn’t likely to waiver from 4% to 6% total. The ceiling is going to be set by the area you’re in, even with negotiations. But the amount that you, as a Realtor, make in commission is somewhat under your control because you can always do more.
Are commission rates negotiable?
Real estate agent commission rates are negotiable, but don’t be surprised if your agent holds firm on how much they charge. A 2019 study from the Consumer Federation of America interviewed 200 agents and brokers nationwide and found that 73% will not negotiate their commission. One reason agents gave for not lowering the rate was their ability to negotiate a higher sale price for the seller.
Top-producing agents especially would not be likely to devalue their services — the reason being, they have a stellar reputation, they don’t need to reduce their rate to attract client, and they’ve invested in certifications and trainings to provide expert services. Because an agent’s services often include photography and a pricing analysis, a lower commission could also translate as a smaller marketing budget for your property or inaccurate list price, reducing the home’s promotion, exposure, and likelihood of selling.
“There was a house that was being listed by a ‘you move free’ discount broker.” It was on the market for 81 days,” shares Moussa. “They fired that agent and hired us. It was a renovated farmhouse. We brought in a stager, did drone photography and videography, and properly marketed it and got multiple offers.”
Exceptions can occur if you’ve already found a buyer. Let’s say you’re selling your house to a friend, or have decided to sell to a family member, in that case, the agent would likely be willing to play the role of transaction coordinator and independent go-between for a reduced commission rate.
In summary, commissions are negotiable but do your research first. When asking an agent to lower their pay, you’re limiting the pool of agents willing to work with you. And the downsides to working with a low-commission agent can be steep. Without a top agent in your corner, you could dramatically undersell your home, have a rough selling experience, or fail to sell the home at all.
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