Real estate agents primarily get paid through commissions based on the successful sale or purchase of a property. They do not earn a salary or hourly wage in most cases but instead receive a percentage of the property's sale price once a transaction closes
How Commissions Work
- Traditionally, sellers paid a total commission of about 5% to 6% of the sale price, which was split between the seller’s agent (listing agent) and the buyer’s agent
- As of 2024, new rules require buyers to pay their own agent’s commission directly, rather than the seller covering both sides. This change aims to increase transparency and potentially lower fees
- The commission is typically negotiated between the agent and their client (buyer or seller) and varies by market conditions, property type, and agent experience
Commission Splits
- The commission is paid to the broker, who then splits it with the agent according to their agreement. A common split is around 50-50, but this varies based on experience and brokerage policies
- If both buyer and seller agents are involved, the total commission is split between the listing broker and the buyer’s broker, and then further split with their respective agents
Alternative Payment Models
- Some agents may charge flat fees, hourly rates, or receive salaries in rare cases (e.g., agents employed by companies like Redfin)
- Agents can also earn referral fees by directing clients to other service providers
Summary
- Real estate agents earn money mainly through commissions, which are a percentage of the property sale price.
- Sellers traditionally paid the commission, but now buyers pay their own agent directly.
- Commissions are shared between brokers and agents, and the exact split depends on negotiated agreements.
- Alternative compensation methods exist but are less common.
This commission-based structure means agents’ income depends heavily on sales volume, property prices, and market conditions
