How Much Does a Real Estate Agent Make Per Sale?
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Q: I’m looking to buy a house soon, but I’ve heard real estate agent fees can really add up. How much does a real estate agent make per sale, and how do real estate agents get paid?
A: While hiring a real estate agent isn’t required, many people turn to an agent for help navigating the process of buying or selling their home. If buyers or sellers enlist the help of an agent, it’s important to be aware of how they’re paid for their work and what you as a buyer or seller might be accountable for.
So, how much does a real estate agent make per sale? The answer isn’t entirely straightforward. It depends on a few factors, such as sale price, real estate brokerage policies, the housing market, and more.
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Multiple types of real estate agents may split a percentage of a home’s sale price.
Before diving into how real estate agents get paid, let’s define the different types of real estate agents and how their titles and roles can affect their pay. All of these agents must hold a real estate agent license, but some go through additional training or belong to professional organizations that give them additional titles.
Buyer’s agent: A buyer’s agent is a real estate agent representing the buyer in a transaction. They schedule property showings, provide market data, and help buyers negotiate and make an offer.
Listing agent: A listing agent represents the seller in a real estate transaction. They use data to price a home at a competitive rate, advertise the property, and help sellers choose the best offer to accept.
Realtor: A Realtor is a real estate agent who is a member of the National Association of Realtors (NAR). NAR requires agents to uphold the organization’s code of ethics and pass additional exams. However, there are no major differences in pay between Realtors and non-NAR member real estate agents.
Broker: A broker is an experienced real estate agent with a broker license. Real estate brokers ensure transactions are handled lawfully with the correct paperwork and procedures. All real estate agents must work with a broker. Brokers may run brokerages with agents reporting to them or choose to work on their own, and they tend to earn more than real estate agents.
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Commissions are real estate agents’ primary income source.
Most real estate agents are paid on commission, which is usually 5 to 6 percent of a home’s sale price. A Clever Real Estate survey shows that the national average real estate agent commission is a little more than 5 percent.
Once a home is sold, sellers typically pay the commission fees of both their agent and the buyer’s agent. The listing agent and buyer’s agent then split the commission, usually evenly. Most sellers factor that payment into the asking price, meaning buyers might unknowingly pay a portion of the commission.
Agents also have to pay a portion of commissions to their brokers, a cut which varies. More experienced real estate agents may keep as much as 90 percent of the commission, but newer agents may pay up to 70 percent of commissions to their broker.
Let’s walk through the commission split of a hypothetical home sale.
A seller sells their house for $500,000. The commission is 6 percent, or $30,000, and will be paid by the seller and split 50-50 between the real estate agents. Both the buyer’s agent and listing agent have a 60-40 split on the commission with their brokers. This means each broker keeps $6,000 and each agent receives $9,000.
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Real estate agent commissions can be negotiated.
Real estate commissions can take a considerable chunk out of a seller’s profits, but the good news is that these fees are negotiable and variable. It’s against antitrust laws for brokerages to agree to fixed commissions together, as this would prevent clients from finding lower commission rates. Each broker or brokerage must determine commissions independently based on the value they bring to clients.
Lauren Byington, a Texas-based real estate agent, says most brokerages set commissions at 6 percent, but buyers and sellers looking to negotiate should ask the brokerage or agent what commission range they will accept. “Brokerages have operating policies and standard procedures stating what they will and will not accept for commission percentages,” Byington explains.
Richard Harless, managing partner of AZ Flat Fee, says sellers may also be able to negotiate based on how move-in ready a home is or desirable the neighborhood is. Harless states, “Agents are willing to reduce their commission rates if your home is where properties sell quickly.”
On average, real estate agents in the United States make around $49,000 per year.
According to the Bureau of Labor Statistics, the average yearly salary for a real estate agent was just under $49,000 for 2021. Precisely how much money an individual real estate agent makes, however, can vary widely due to multiple factors, such as:
- Location: The market where a real estate agent works influences real estate commission, since listing prices will vary accordingly. Large urban areas typically have higher real estate prices and more opportunities, leading agents in these locations to receive more business and higher commissions than rural markets.
- Number of sales: The more houses an agent sells, the more money they make. A real estate agent’s compensation is dependent on their performance, so if they fail to make many sales, their overall pay will be lower.
- Overhead costs: Real estate agents are generally responsible for costs required for them to run their business. These costs include transportation, office supplies, real estate agent license renewal, training, and advertising expenses.
- Years of experience: Typically, agents with more experience earn higher incomes than agents with less experience. Agents who have been in the profession for longer will generally have more market insights, broader knowledge of successful techniques, and a wider industry network.
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Real estate agents get paid only when a home sells, unless there are contingencies in the listing agreement.
Agents typically only make money if a sale is completed. However, real estate agents can protect themselves through contingencies in listing agreements, guaranteeing their pay if a sale falls through due to something out of their control. An agent may, for example, still need to be paid if any of the following terms are included in a listing agreement:
- Sellers have an incorrect title and the sale can’t be completed.
- Sellers commit fraud under the terms of the sale.
- Sellers have good offers from buyers, but refuse to sell.
Some agents may also add a fee in the listing agreement for marketing services, such as professional photography, in the event a home doesn’t sell.
Boyd Rudy, an associate broker with Dwellings Michigan, recommends that homeowners ask about brokerage policies in case a property doesn’t sell or if they will be held responsible for any retainer fees before choosing to work with an agent. “Some agents might charge a flat fee or retainer in addition to the potential commission, providing additional compensation even if the property doesn’t sell,” Rudy says.
While these situations and terms aren’t common, sellers should go over the terms of the listing agreement carefully to be aware of any contingencies and situations where they might be responsible for real estate agent fees.
While rare, some real estate agents are paid an annual salary and earn bonuses rather than a commission.
Some agents might prefer the predictability of a salary and choose to work with a brokerage that pays an annual salary and bonus instead of working on commission.
Redfin is one example of this business model. Agents at Redfin receive a base salary and earn bonuses for every sale they make, instead of an income based solely on commission. According to Redfin, the average real estate agent salary there is $160,000 for agents with three or more years of experience.
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Using a real estate agent isn’t required.
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Of course, buyers and sellers can choose to forgo a real estate agent in the home-buying or selling process.
Sellers can list their home as for sale by owner and take on the responsibilities of marketing the property and negotiating a sale price. There are also options to pay a fee to list the home on the Multiple Listing Service (MLS), where real estate agents share available properties with other agents and sites like Zillow or Realtor.com.
While there are risks associated with selling or buying without an agent, such as listing a home under its value, overpaying for a home, or struggling to advertise the property, buyers and sellers who can navigate the transaction process will save on real estate commission.
More FAQs About Real Estate Agent Compensation
Still wondering about how much real estate agents get paid? Considering a career in real estate for yourself? Dive into these quick answers to common questions below.
Q. Do real estate agents get paid when a sale is not closed?
In most cases, no. The terms of the listing agreement will outline if there are circumstances when an agent would require payment even if the home doesn’t sell.
Q. Do real estate agents have a base salary?
Not usually. Most agents work on commission for each sale, but there are some brokerages that pay a real estate agent salary and a bonus.
Q. What is the average commission for Realtors or real estate agents?
The average Realtor commission is 2.5 to 3 percent of a home’s sale price after splitting the 5 to 6 percent commission with the agent representing the other party. That commission may then need to be shared with the agent’s broker.
Q. Is a real estate agent job stressful?
Since most agents work on commissions of their sales, the possibility of inconsistent income can be stressful. “The variability in housing and clientele is one of the most stressful unknowns for real estate agents, but multiple sources of income for agents, such as short- or long-term rentals, can prevent stress,” says real estate agent Lauren Byington.
Q. Can a real estate agent get a fixed commission?
Real estate commissions are negotiable. In a listing agreement, the sellers and the broker agree to a set commission percentage to be paid out when the home sells.
