Content of the material
- What percentage do real estate agents make?
- Real estate commission, by the numbers
- How much does a real estate broker make?
- Why a real estate agent is worth the commission
- How Real Estate Commissions Work
- How Commissions Are Shared
- How do real estate agents get paid?
- How Much Do Real Estate Agents Make?
- What is the Average Real Estate Agent Commission in California?
- 👋 Next Steps: Talk to an expert!
- OK, Literally How Does an Agent Get Paid?
- How Do Agent Commission Splits Work in California?
- How the real estate agent commission is set
- What do these fees cover?
- How and When Does the Money Change Hands?
- Final Thoughts on REALTOR Pay
What percentage do real estate agents make?
While realtor commission fees vary regionally, the average seller can expect to pay between 4.45% to 6.34% of the home's final sale price, according to our research. The U.S. average is currently 5.37%.
The listing agent usually receives 2.72% of the proceeds. The remaining portion of the commission fee — 2.65% on average — goes to the buyer's agent.
📊 Why do commission rates vary? Although national averages illuminate trends in real estate commission, they don’t tell the whole story. Local market conditions — as well as individual realtors’ rates — can impact what you’ll pay. For example, the average total commission in New Hampshire is just 5.12%, while rates in New Mexico are 5.59% on average. No matter where you live, we recommend interviewing multiple agents and checking out low commission real estate companies (like Clever!) to find the best service for the most competitive fees.
Real estate commission, by the numbers
To illustrate how commission costs add up, let's say you sold your home for $250,000.
Under the traditional 6% commission rate, you would pay $15,000 in commission fees. Your listing agent would split this fee with the buyer's agent, so each would receive $7,500.
Now, let's compare that to what you'd pay a low commission real estate agent. If you paid 4% commission (1% listing fee, plus 3% buyer's agent commission), the total would be $10,000. You'd save $5,000!
How much does a real estate broker make?
Brokers — who complete extra licensing requirements to either work independently or hire other agents under them — earn an average annual salary of $86,930.
In addition to keeping 100% of the commission from their own deals, brokers earn a percentage of the commission brought in by the agents who work for them.
Many brokers split commissions 50/50 with their agents, so if the commission from the sale is 3%, they make 1.5%.
Other brokers may not collect commissions but instead earn a salary for taking on a brokerage’s day-to-day operations and keeping a firm in compliance with state and national real estate laws.
Why a real estate agent is worth the commission
Having a real estate agent on your side as a buyer can make home shopping less stressful — and you may find better properties, or get a better deal, than you would have on your own.
For sellers, it’s a better way to list your home and bring in more prospective buyers.
And for both sellers and buyers, it helps to have a professional on your side who can help navigate the complexities of such a big real estate transaction.
Also, “buyer’s agents work much harder for their money,” says Buttner. “They often work with a particular buyer for months. They show them multiple houses and make many offers before something sticks.”
For this reason, the buyer’s agent sometimes makes a bit more than the seller’s agent.
“A lot of brokerages that charge less than 6% will still offer the buyer’s agent a full 3%,” Buttner says.
Remember that an agent’s hard work is not rewarded with every client. Those national average salary statistics collected by the BLS and other sources don’t show this unpaid effort.
“Not all transactions result in them getting a commission,” says Ailion. “So the costs associated with transactions that don’t close must be factored into those that do.”
Ailion understands that 6% may seem high. But, he adds, you really get what you pay for.
“Like a good doctor or lawyer, I believe a good agent is worth their fee,” Ailion says. “You’re dealing with likely the most significant asset in your life. So choosing the best representation makes sense.”
How Real Estate Commissions Work
When a property is put on the market, the seller and the listing broker sign a listing agreement, which is a contract detailing the terms of the listing, including the broker’s compensation—usually a commission. It’s important to note that the commission is always negotiable. In fact, it is a violation of federal antitrust law for members of the real estate profession to attempt, however subtly, to impose uniform commission rates.
Commissions generally range between 5% and 6% of the final sale price, though they may be higher or lower based on market conditions. Unless the buyer and seller negotiate a split, it is the seller who pays the commission. Most sellers factor the commission into the asking price, so it could be argued that the buyer always pays at least part of the commission, either directly or indirectly (through a higher purchase price).
Both the seller's agent and the buyer's agent have agreements with their sponsoring brokers that specify the agent's cut of the commission. It can be a 50/50 split between the broker and the agent or any other split they choose.
How Commissions Are Shared
Real estate commissions are often divided among several people. In a typical real estate transaction, the commission is split four ways:
- Listing agent—the agent who took the listing from the seller
- Listing broker—the broker who employs the listing agent for the seller
- Buyer's agent—the agent who represents the buyer
- Buyer's agent's broker—the broker who employs the buyer's agent
How do real estate agents get paid?
Real estate agents earn a commission each time they assist a buyer or seller with a sale.
The commission amount — including the percentage that goes to the buyer’s agent — is specified in the listing agreement drawn up between the home seller and their agent.
When a home sale closes, commissions are deducted from the proceeds and distributed through the escrow or title company directly to the buyer’s and seller’s agents’ brokerages.
Each broker then disburses the proper share to their agent, according to their agreed-upon commission split, which typically starts at 50/50 and graduates to 70/30 or better as agents grow their sales numbers.
Some agents (like those who work for Redfin) get a base salary from their brokerage and earn a smaller commission from each sale — but most work exclusively on commission.
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.
What is the Average Real Estate Agent Commission in California?
The average California real estate agent commission rate is between 5-6%. However, commission on higher-priced home and property sales average 4-5% percent. The seller and agent usually negotiate the commission amount before entering into a listing contract.
The average salary of a California real estate agent is $99,575. However, there is a wide gap in the salary range, with the lowest earners making $24,970 and the highest earners topping out at $123,700 per year.
👋 Next Steps: Talk to an expert!
If you’re weighing your options for buying or selling a house, Clever can help!Our fully-licensed concierge team is standing by to answer questions and provide free, objective advice on getting the best outcome with your sale or purchase.Ready to get started?Give us a call at 1-833-2-CLEVER or enter your info below. Our concierge team will be in touch shortly to help.Remember, this service is 100% free and there’s never any obligation.
OK, Literally How Does an Agent Get Paid?
Now that you know what they get paid and how it’s decided, how do agents literally get paid? Does it come out of your pocket?
The agents will get their payout when it comes to closing time. When you go in to sign all the paperwork and make the purchase or sale of your home official, there will be line items on all the paperwork dedicated to paying out the agents. It’s likely that, unless it’s a cash transaction, that you or your bank account will never see the money that you’re paying the agent.
How Do Agent Commission Splits Work in California?
How much do California real estate agents take home after each close? There are a few commission splits to consider.
First is the total commission paid by the seller. In California, it ranges anywhere from 1-6% of the sales price. The standard is 5-6%, but for high-priced properties (i.e. $1+ million) the commission may be more like 4-5%. The amount is negotiated between the seller and listing agent before a contract is signed.
Next comes the commission split between the listing and buyer agent. Typically, the commission is split 50/50. Every now and then you may see a listing that offers the buyer agent a higher split in hopes of attracting more leads. The opposite can also be true. The listing agent may take 3.5% to offset the expenses of selling the property and offer just 2.5% to the buyer agent.
Dual agency is another possibility. If the listing agent ends up finding the buyer and representing both then they receive the full commission.
Finally, the commission split between agent and broker. The broker will receive the proceeds from a sale, then pay the agent their cut. The agreed upon commission split can differ from agent to agent even within the same brokerage. New agents may receive a 50/50 split while seasoned agents can get upwards of 70/30 or 80/20.
There are also two other possible commission scenarios. You may pay a monthly broker fee and keep 100% of the commission. The broker may also offer a sliding scale commission split. In this case, the commission starts low around 40/50 or 50/50 and becomes more advantageous the more you sell.
Be aware there could also be additional broker fees per sale, month or year.
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.”
What do these fees cover?
While many of today’s buyers often prefer to house hunt on their own, others decide to work with an agent to find a home. For those who choose to work with a traditional buying agent, they’ll find that their agents spend most of their time pulling home listings, driving to tour homes and doing pricing analysis to help them make strong offers.
Once the buyer’s offer is accepted and enters escrow, the agent will spend their time helping coordinate inspections and appraisals, negotiating repairs costs, handling all of the closing paperwork and some light accounting (the agent is responsible for maintaining the financial account used to pay inspectors and appraisers).
How and When Does the Money Change Hands?
Real estate commissions are paid like this:
- The seller pays the listing brokerage.
- The listing brokerage pays the listing agent.
- The listing brokerage pays the buyer's brokerage.
- The buyer's brokerage pays the buyer's agent.
The seller effectively pays your buyer's agent to negotiate on your behalf.
There are circumstances under which a buyer might pay a brokerage directly, such as when there’s no commission offered because the property is for sale by owner. The commission is typically paid by the seller to the listing brokerage. The listing brokerage divides the commission in some fashion with the broker of the agent who brings an offer.
Compensation is typically made at closing when it's deducted from the seller's proceeds from the sale.
Buyers don't have any say in how much commission is paid by the seller, and they don't have to worry about personally compensating their agents. Of course, they're free to do so if they want to sweeten an offer made on the home by offering to pay a portion of the seller's commission, but again, the buyer cannot pay their agent directly.
Final Thoughts on REALTOR Pay
If you’re read this far, you now know how agents get paid and how commission splits work. You also know that there are more parties to the transaction than just the two agents representing the buyer and seller. Realtors incur many expenses that eat into those seemingly wonderful profits. To be sure, it’s fun and rewarding profession with many responsibilities. Marketing is just the cost of doing business. Lastly, be wary of dual agency situations.