how do real estate agents get paid

Have you ever looked at a bill of sale and wondered who gets paid for the sale of a home?

Real estate agents get paid certain fees every time they sell a home. In fact, the estimated annual salary of an agent ranges near $40K and $52K at the most.

That’s based off the number of years in the business. But a lot more goes into those figures. Just what real estate agents make and how they get their money has mystified many over the years.

We have the breakdown. Read on as we answer the question how do real estate agents get paid?

Commission Explained

Unlike other professionals who receive their pay through a traditional payroll check template, Real estate agents earn the bulk of their salary through commissions.

A commission is service charge paid directly to the agent as a result of rendering their services in the sale of a home. This payment gets broken down in several ways:

Commission Percentage

Depending on the type of home or its location, a commission percentage can fluctuate, but it’s typically a percentage of the selling price of the home.

Most realtors in the US charge around 6%, which gets spelled out in the listing agreement.

Say the sale price of a home is $300,000. The commission paid to a real estate agent would be $18,000.

Flat Rate Fee

A flat rate fee is a set fee charged for the sale of a property. It differs in that an agent can charge a set fee for services not offered in a commission percentage.

Example, professional photos and cash back on the purchase of your next property. It also means that regardless of the price of the house, the fee doesn’t change.

The seller pays this commission. The amount’s deducted from the proceeds of the sale of a property.

Split Commissions

More than often real estate commissions get split between several people. It’s shared in four ways:

  • The listing agent and the listing broker representing the seller get paid.
  • The buyer’s agent and the buyer’s broker get paid.

Take the $300,000 home discussed earlier for example. In the split scenario, the brokers receive pay first.

At a 6% commission, both brokers get half of the $18,000 payout–$9,000 each. They then do a 60/40 split with the listing agents and buyer’s agent. The payout would look like this:

Listing Broker – $5,400

Listing Agent – $3,600

Buyer’s Broker – $5,400

Buyer’s Agent – $3,600

This breakdown is not concrete, as parties in the sale may act on behalf of others. In such a case, that party collects the entire commission. And in some cases, top producing agents may negotiate more favorable splits.

Referral Fees

Real estate agents also build their salaries through real estate referrals. Referrals are fees paid when an agent or broker refers a potential client to another broker or agent.

The referral fee does not get paid out unless the sale closes. The average referral fee is 25% of the agent’s earned commission. But it can fluctuate between 20% and 35%, depending on the agent.

So, How Do Real Estate Agents Get Paid?

All real estate agents and brokers have their own method of receiving compensation. So this explanation of an agents salary is not exhaustive.

It should, however, serve to answer the basic question of how do real estate agents get paid.

Read more of our advice for sellers and buyers for more insight into real estate ventures.