What Percentage Do Real Estate Agents Make?

Here’s an overview of how real estate agents are paid and their respective earnings. Current national commission rates stand at approximately 5.37% of a home’s final selling price. This fee typically splits evenly among both listing and buyer’s agents who process a transaction using proceeds from a sale of property, coming directly out of seller proceeds.

Disagreements Regarding Real Estate Commissions

Selling your home will incur many expenses; realtor fees being one of them. Many consumer advocates argue that real estate commissions are both too costly and too complicated.

Though commissions may technically be negotiable, real estate agents tend to avoid making concessions and answering directly any inquiries related to commissions.

Consumer Federation of America surveyed 200 agents and discovered that 73% would refuse to discuss commissions with clients.

Change Is Coming to Real Estate Commissions

Consumers can rejoice that changes may soon occur to real estate commissions.

Class action lawsuits, antitrust investigations, and novel business models in real estate are altering the percentage that realtors typically earn on sales transactions.

Real Estate Agent vs. Broker vs. Realtor

Gaining insight into the relationship between agents and brokers helps answer what percentage do real estate agents make?

Real estate agents are salespeople licensed to operate under the supervision of an appointed real estate broker who ensures compliance with state and national real estate laws.

Agents cannot work independently and take commissions from clients directly.

Independent Brokers Hiring Real Estate Agents

Independent brokers employ real estate agents as employees. Each real estate office has one authorized broker. Every commission payment must go directly to the broker who then disperses it to all agents who were involved with a deal.

Both real estate agents and brokers who belong to the National Association of Realtors (NAR) may use the title realtor if they agree with its code of ethics and adhere to it.

How Real Estate Commissions Work?

Broker’s Compensation Agreement

Listing brokers and sellers sign an agreement that sets forth its terms, including compensation arrangements that might involve commission. When listing their property for sale they typically sign such an agreement between themselves to protect both parties involved from missteps along the way.

Notably, the commission is always negotiable.

Standard Commission Rates Are Violating Federal Law

Real estate agents who attempt to implement standard commission rates through any means whatsoever violate federal antitrust law and should cease any attempts at doing so immediately.

At present, average figures exist that provide answers to the question “What percentage do real estate agents make?”.

Average Real Estate Commission Rates

Commission rates typically fall within 5-6 percent of the final sale price; they can sometimes even go higher or lower depending on market conditions.

If a split cannot be agreed upon between the buyer and seller, the commission will fall solely onto them.

One could contend that buyers always pay at least some commission since most sellers include it in their asking prices (through higher purchase prices).

Both seller’s agent and buyer’s agent enter into agreements with their sponsoring brokers that outline how much commission their agents receive for acting as such agents.

This may involve splitting commission 50/50 between broker and agent or choosing to divide in any other fashion.

How Commissions Are Divided?

When asking, “What percentage do real estate agents make,” there is one key point you need to remember. 

Real estate commissions often are shared among several parties.

An average real estate transaction splits the commission into four parts:

1. Listing Agent refers to agents hired to take listings from sellers.
2. A Listing Broker refers to a broker who employs a listing agent for a seller. 
3. The buyer’s Agent represents the buyer’s interests.
4. Buyer’s Agent Broker hires one on behalf of sellers and/or buyers respectively. 

Why Do Commission Rates Vary?

National averages may provide insight into trends related to real estate commissions; however, these numbers don’t tell the whole picture.

So what percentage are real estate agents earning when rates vary?

Nevada boasts an average total commission rate of just 5.02%, lower than the national average of 5.37%.

No matter where you reside, we advise speaking to several agents and contacting firms with low commission rates to find an excellent service at an economical cost.

Real Estate Commissions by The Numbers

To more precisely answer the question ” refer to agents hired to take listings from sellers,” let us assume you sold your house for $250,000. Assume they made 3 percent on this deal (25,000.)

At a traditional 6% commission rate, your fees would amount to $15,000. Your listing agent and buyer’s agent would divide that fee evenly; each would take home $7,500 as their share.

Compare that cost with what a real estate agent with a low commission would charge you.

If you were to pay 4% commission (1% listing fee plus 3% buyer agent commission), that would total $10,000 in commission payments. Your savings of $5,000 is significant!

Who Pays Realtors?

In general, sellers pay a full commission to their listing agent. What percentage do real estate agents make? will be answered within your listing agreement (i.e. contract you sign with your agent).

A listing agent typically splits part of their commission with both buyer’s agents, typically half. Most often, both agents split part of their commission with their brokers.

Why Pay Buyer’s Agent Commissions? 

Offering an aggressive buyer’s agent commission can draw extra interest and attention to your listing. It helps make a difference when trying to attract potential buyers!

Think of it this way: If your budget falls outside the typical buyer’s agent commission range of 2.19%-3.17%, local realtors may be less motivated to show your home to their clients.

After all, they could make less on the sale!

Let’s Calculate Real Estate Agent Pay 

On paper, listing agents typically earn between $8,046 and $11,286 when selling an average home, while buyer’s agents often make between $7,797 to $11,286 from buyer agent commission.

However, in the US an average real estate agent typically makes only around $5,977 from each home they sell or manage. This amount is much less than what will be due upon closing.

Agents Pay Their Commission When the Sale Is Complete.

Most real estate agents work through brokerage companies such as Keller Williams, Coldwell Banker, or RE/MAX.

Because brokerage companies cover certain overhead costs, agents must remit part of their commission after closing on a sale to cover these fees. An agent’s exact take-home pay depends upon their agreement with their broker.

Experienced agents typically retain a larger portion of their commissions than less experienced ones.

Want an Example of a Real Estate Commission?

Do you want to know how much real estate agents make when their broker closes a deal? Below is an illustration.

Example:

Let’s assume an agent lists a $200,000 house with a commission rate of 6% – this would total $12,000.

Suppose the home sells at its asking price: the real estate broker and buyer’s agent broker each will split 50% commission or $6,000 ($200,000 sales price x 0.06 commission/2).

Brokers then divide up their commissions amongst their agents.

A typical commission split typically allocates 60% to the agent and 40% to their broker; however, any agreed-upon split between agent and broker could vary between 50/50, 60/40, 70/30 etc.

Experienced agents with higher pay often receive a greater share of commission.

Under such conditions, an even split would result in each agent receiving $3,600 ($6,000 x 0.6) while brokers kept $2.400 each ($6000 x 0.4%).

Below is the final breakdown of the commission:

• Real estate agent: $3,600
• Real estate broker: $2,400
• Buyer’s agent: $3,600
• Buyer’s agent broker: $2,400

Commissions Can Be Split In Different Ways 

Commissions are commonly split between a few parties. However, in certain instances, commissions may be split among only one or two parties.

Example: 

If a broker lists and sells property and finds a buyer for that property, that broker is entitled to collect his/her full 6% commission (or whatever rate was agreed in the listing agreement).

Or if a real estate agent sells the property on behalf of both seller and buyer, that agent will divide their full commission with his/her sponsoring broker.

As in our example above, with a $12,000 commission split 60-40 between broker and agent. When this occurs, the broker receives $4.800 while their respective agents each get 7.200.

As in other professions, an agent’s income will inevitably be decreased by taxes and business expenses.

Federal, state, and self-employment taxes as well as business expenses such as insurance premiums, fees paid to multiple listing services (MLS) fees and advertising consume much of an agent’s commission.

What Percentage Do Real Estate Agents Make Annually?

According to Indeed.com in 2022, the annual salary range for real estate agents typically varies between $85,597 to over $123,000 depending on their experience levels and age of start date.

According to recent statistics from the U.S. Bureau of Labor Statistics, in 2021 the average annual salary stood at $48,770.

Brokers earned an average annual salary of $86,490.8.

2021 saw agents earning over $102,170 while brokers made more than $176,080.

Commission Payment in Case a Sale Doesn’t Close 

Commission payments usually don’t come due until after a sale closes. Even when sales don’t close as planned, sellers could potentially still owe broker’s commission payments in certain instances. Listing agreements often stipulate these regulations. Such situations may only rarely arise, yet they’re possible nonetheless.

For Example: 

The broker receives an offer from a potential buyer but the seller refuses or fails to act:

• The decision not to Sell
• Husband or wife who refused to sign a contract (if either signed listing agreement). 
• With an incomplete title that contains undamaged defects. 
• Fraudulently affects sale transactions.
• Provide possession to buyers promptly. 
• Demands terms not contained within the listing agreement.

Importantly, each listing agreement varies and should be tailored specifically for every property listed for sale. Some agreements include contingencies requiring sellers to pay commission even if their home does not sell and might include non-sale clauses that force sellers to cover commission costs even when properties don’t sell as quickly or for as much.

Can You Negotiate Realtor Commissions? 

In theory, realtor commissions may be negotiable. Talking with your agent may help with negotiations but in practice, agents tend to resist lowering their rates.

There are certain circumstances which increase your chance of successfully negotiating a commission:

• Buying and selling with the same agent.
• An agreement for double agency can help make transactions simpler by eliminating unnecessary paperwork from both transactions.
• Selling in an ultra-competitive seller’s market.
• In both scenarios, one agent could charge both a listing fee and buyer agent commission; to maximize profits further, this agent might consider offering reduced rate services or possibly offer two separate listings under their umbrella.