If you're in the market to buy or sell a home, odds are you'll work with a real estate agent to help you through the process. Most real estate agents are paid for their services through commissions that are based on a percentage of the property's selling price.
How much money agents make each year depends on a number of factors, including the number of transactions they complete, the commissions they bring in, and the split with their sponsoring broker. Here's a rundown of how real estate agents get paid—and how much they make.
Key Takeaways
- Most real estate agents make money through commissions.
- A single commission is usually split four ways—between the agent and the broker for the seller and the agent and the broker for the buyer.
- The commission split depends on the agreements the agents have with their sponsoring brokers.
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How Real Estate Agents Get Paid
Real Estate Commission
Most real estate agents make money through commissions that are based on a percentage of a property's selling price, (Commission can also be flat fees, but that is much less common.) Agents work under real estate brokers, and the commissions are paid directly to the brokers.
Real Estate Agent vs. Broker vs. Realtor
The relationship between agents and brokers helps explain how real estate agents are paid.
Real estate agents are sales people licensed to work under the umbrella of a designated real estate broker, who ensures the agents are in compliance with state and national real estate laws. Agents cannot work independently and are prohibited from receiving commissions directly from their clients.
Brokers, who are able to work independently, hire real estate agents as their employees. Each real estate office has one designated broker. All commissions must be paid directly to a broker, who splits the commission with any agents involved in the transaction.
Both real estate agents and brokers can have the title of Realtor, if they are members of the National Association of Realtors (NAR) and subscribe to its code of ethics.
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 detailingthe 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
Example of a Real Estate Commission
Here's an example of how a real estate agent is paid a percentage of the commission that the listing broker earns on the transaction.
Say an agent takes a listing on a $200,000 house at a commission rate of 6%. This equals a total commission of $12,000. If the house sells for the asking price, the listing broker and the buyer's agent's broker each get 50% of the commission, or $6,000 each ($200,000 sales price x0.06 commission ÷2). The brokers then split their commissions with their agents.
A common commission split gives 60% to the agent and 40% to the broker, but the split could be 50/50, 60/40, 70/30, or whatever ratiois agreed by the agent and the broker. It is common for more experienced and top-producing agents to receive a larger percentage of the commission.
In a 60/40 split, each agent in our example receives $3,600 ($6,000 X 0.6) and each broker keeps $2,400 ($6,000 X 0.4). The final commission breakdown would be:
- Listing agent: $3,600
- Listing broker: $2,400
- Buyer's agent: $3,600
- Buyer's agent's broker: $2,400
There are cases, though, in which commissions are split among fewer parties. For instance, if a broker lists a property and finds a buyer, that broker would keep the full 6% commission (or whatever the rate in the listing agreement is). Or, if a listing agent sells the property by acting as agent for both the seller and the buyer, that agent would split the full commission with their sponsoring broker. If the commission is $12,000, as in the previous example, the broker keeps $4,800 and the agent receives $7,200 (assuming the same 60/40 split).
Of course, as in other professions, an agent's earnings are eroded by taxes and business expenses. Federal, state, and self-employment taxes as well as the cost of doing business—insurance, dues, multiple listing service(MLS) fees, and advertising—end up taking sizable chunks of the agent's commissions.
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.
Commissions When the Sale Doesn't Close
Commissions are generally paid only when a transaction settles. There are instances, however, when a seller is technically liable for the broker's commission even if the sale doesn't close—and often the terms specifying this requirement are in the listing agreement. This situation is rare, but it could happen. For example, if the broker has an offer from a buyer who is ready and able to make the purchase, but the seller does any of the following:
- Changes their mind and refuses to sell
- Has a spouse who refuses to sign the deed (if that spouse signed the listing agreement)
- Has a title with uncorrected defects
- Commits fraud related to the transaction
- Cannot deliver possession to the buyer within a reasonable time
- Insists on terms not listed in the listing agreement
- Mutually agrees to cancel the transaction with the buyer
Listing agreements vary and each is individually negotiated. They may include contingencies that require a seller to pay the commission even if the home doesn’t sell.
Other Pay Models
Although the most common pay model for real estate agents is a percentage of the commission, some agents employed by brokers are paid a salary. Redfin—an online property search site that employs a staff of full-service real estate agents—is one example. Their agents are paid a salary plus a bonus based on customer satisfaction ratings.
When Are Real Estate Fees Paid?
Real estate commissions are deducted from the sale proceeds at closing and paid directly to the brokers, who split them with the agents involved.
Do Real Estate Agents Get a Base Salary?
Most real estate agents are paid on a commission-only basis. But certain agents—including those who are employed by companies like Redfin—get a base salary plus bonuses.
Are You Supposed to Pay Your Real Estate Agent?
Consumers don't pay real estate agents directly. Brokers receive the commission, which is taken from the total proceeds of the sale. This amount is then split between the broker and the agent.
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.
What Percentage Do Most Real Estate Agents Charge?
Real estate commissions typically range between 4% and 6% of a property's sale price. This amount is further divided between the brokerage and the agent who worked on the sale.
The Bottom Line
Most real estate agents make money through commissions that are paid directly to brokers when transactions are settled. A single commission is often split multiple ways, among the listing agent, the listing broker, the buyer's agent, and the buyer's agent's broker. The commission split a particular agent receives depends on the agreement the agent has with their sponsoring broker.
FAQs
How most real estate agents are paid? ›
Most real estate agents make money through commissions that are based on a percentage of a property's selling price, (Commission can also be flat fees, but that is much less common.) Agents work under real estate brokers, and the commissions are paid directly to the brokers.
How do estate agents make money? ›Summary. Estate agents generally make money by charging fees based on a percentage of a property sale price, or a percentage of the monthly rent on a property. This type of fee is known as a commission.
Do real estate agents get paid well? ›According to figures from unitedpropertyconnect.com, UK residential estate agents make an average salary of £41,392, that's much higher than the UK average salary. With years of experience under their belts, successful and experienced agents can earn anything between £50,000- £100,000.
What percentage do most brokers take from agents? ›So each brokerage company (listing agent and buyers agent) gets 2.5 to 3 percent of the sales price. The individual agent then splits that with his or her broker at varying amounts, sometimes in half, so the agent is now down to 1.5 to 2 percent of the sales price.
How long does it take to become a real estate agent? ›Key Takeaways. You can become a real estate agent in about four to six months, depending on where you live. The general steps to earning a license include taking the real estate prelicensing course and licensing exam, and then activating your license, and joining a brokerage.
Do you pay a real estate agent if you are the buyer? ›If you're wondering whether you need a Realtor to buy a home, the short answer is no. You might be hesitating to work with one because you don't want to be saddled with Realtor fees, but typically, buyers don't pay a real estate agent's commission — sellers do.
Is estate agent a stressful job? ›Work is interesting and you still get to see some lovely properties (on paper!). My DH is a manager of an estate agents, its very stressful with lots of targets and the hours are long, he quite often pops into work to catch up with paper work if he has a rare day off.
Is an estate agent a good career? ›Higher than Average Salary
Working as an estate agent is also an opportunity to build a successful career, from which you can earn an income based on your performance. It is, therefore, a growing market and you will most probably see a positive return on your efforts.
They charge a lot because it takes work and money to market, it is hard to get licensed and become a real estate agent, they have to pay for dues and insurance and real estate agents usually have to split their commissions with their broker. The biggest reason real estate agents make so much money is they are worth it!
How long does it take to make money in real estate? ›It can take about six months to start making money as a real estate agent. Everyone is different, but six months is around the time many agents make their first sale. To start making consistent money, you should plan for about a year. To make a profit, you should plan for up to 18 months.
Is it hard to make money as a real estate agent? ›
It's a common misconception that real estate agents earn a ton of money for doing practically nothing. Selling real estate is more work than you might imagine and although there are some very successful real estate agents, there are many who struggle just to make ends meet.
What state has the highest real estate commission? ›...
Average real estate commission by state.
| State | Rank | Rates |
|---|---|---|
| Massachusetts | 1 | 4.85% |
| California | 2 | 4.91% |
| District of Columbia | 3 | 4.96% |
| New York | 4 | 4.97% |
Keller Williams has a competitive split structure for real estate agents. They offer a 70-30 split. Meaning, 70 percent of the commission will go to the real estate agent and 30 percent will go to the brokerage. In addition, a real estate agent will pay a six percent franchise fee for each transaction up to $3,000.
What is an 80/20 commission split? ›80/20 commission split: This common commission split means that 80% of a commission goes to the individual agent, while 20% goes to the brokerage. In addition, many agents on this plan are required to pay significant monthly or per transaction fees in exchange for facilities and limited administrative support.
Is the real estate exam hard? ›Real estate exams are designed to be difficult to pass, so they can weed out people who are not going to be skilled agents. Though the pass rate varies based on the state exam, they hover around 50% across the country. This means only about half of the people who take a state licensing exam pass.
What does real estate school cost? ›On average, real estate school costs between $100 and $900, though your costs will vary by state and school. Online real estate courses are often priced a little differently than on-campus classes, and some are available in a video-only format, which can save you money on textbooks.
Can you be a real estate agent part time? ›Yes, you absolutely can be a part-time real estate agent with a full-time job, as long as you employ excellent time management skills and don't mind being busy. The most popular open house times are evenings and weekends because most people looking to buy or rent a new home likely also work a 9-5 schedule.
What percentage do most realtors charge? ›Average Realtor Commission: What Percentage Do Most Realtors Charge? In a typical real estate transaction, 3% of the home's sale price goes to the listing agent, and 3% goes to the buyer's agent, for a total of 6%. If you're selling a $600,000 home, for example, this would amount to $36,000 in commission fees.
Do real estate agents play games? ›Homeowners are very likely to overvalue their homes themselves (the endowment effect), And some real estate agents play games with the home values they tell sellers.
How much are closing costs for buyer? ›Closing costs typically range from 3%–6% of the loan amount. 1 Thus, if you buy a $200,000 house, your closing costs could range from $6,000 to $12,000. Closing fees vary depending on your state, loan type, and mortgage lender.
How much do Realtors in Ga make? ›
The average Real Estate Sales Agent salary in Georgia is $42,963 as of September 26, 2022, but the range typically falls between $41,970 and $54,648.
How much does the average realtor make in Texas? ›As of Oct 15, 2022, the average annual pay for a Licensed Real Estate Agent in Texas is $67,484 a year.
How do estate agents get paid UK? ›The average commission is 1.42% of the property's final selling price, including VAT, although it can range from 0.75% to 3%. In many cases, high value properties might have lower commissions. For example, if you received a 1.5% commission on a property worth £250,000, you'd get £3,750.
How much do real estate agents make in South Florida? ›On average, real estate agents make $84,459 per year according to salaries reported by Indeed users.
Can you make money your first year in real estate? ›According to Indeed, the average salary is just over $83,000 for first-year full-time agents — but this rate can vary greatly. As a recent 2020-2021 report reveals, many agents start out by earning a significantly lower salary but actually double their income once that first year is under their belt.
Can you be a real estate agent part time? ›Yes, you absolutely can be a part-time real estate agent with a full-time job, as long as you employ excellent time management skills and don't mind being busy. The most popular open house times are evenings and weekends because most people looking to buy or rent a new home likely also work a 9-5 schedule.
How much does a real estate agent make in a month? ›Average ₱45,466 per month.
Why I quit being a real estate agent? ›The number one reason people quit real estate is because they expect to see immediate results. People expect a solid month of hard work to result in a good deal and a lot of money, and when it doesn't, they are quick to decide real estate must not be for them. The problem is, real estate is not a get rich quick scheme.
Where do Realtors make the most money? ›| Rank | State | 2017 Mean Annual Wage |
|---|---|---|
| 1 | New York | $102,310 |
| 2 | Texas | $72,480 |
| 3 | Hawaii | $72,470 |
| 4 | Alaska | $71,030 |
| OCCUPATION | 2021 MEDIAN PAY |
|---|---|
| General internal medicine physicians | This wage is equal to or greater than $208,000 per year |
| Family medicine physicians | This wage is equal to or greater than $208,000 per year |
| Emergency medicine physicians | This wage is equal to or greater than $208,000 per year |
Is estate agent a stressful job? ›
Work is interesting and you still get to see some lovely properties (on paper!). My DH is a manager of an estate agents, its very stressful with lots of targets and the hours are long, he quite often pops into work to catch up with paper work if he has a rare day off.
Is real estate a Good career UK? ›An Estate Agent is one of the most sought after jobs in the UK today and has always had a lot of people clamouring for the role.
Why do Realtors make so much money? ›They charge a lot because it takes work and money to market, it is hard to get licensed and become a real estate agent, they have to pay for dues and insurance and real estate agents usually have to split their commissions with their broker. The biggest reason real estate agents make so much money is they are worth it!
Is it hard to be a realtor in Florida? ›Getting your Florida real estate license is not easy – the Florida real estate exam is difficult! Our data shows the pass rate is around 50-60% at the first attempt.
Is real estate a good career in Florida? ›Earning Potential: Becoming a real estate agent in Florida is a profession with amazing earning potential. Expecting to arrive at the $100K annual salary benchmark is absolutely within reason. It all depends on how competitive and committed you are to developing your career potential.