Find a REALTOR^® FAQ

How Do Agents Get Paid?
Most home buyers enlist the services of a real estate professional when buying a house. It only makes sense...agents have experience in dealing with the myriad issues surrounding the process, and they usually have the homes listed for sale. But the question often comes up: "How do agents get paid and who is responsible for that payment?" It's a good question and worthy of an answer.

First, we need to state that every agent must work for a broker. Usually the name of the broker can be found on the agent's business card or "for sale" sign. That broker is the one licensed with the state to do business. If it is a franchised broker, the name may be a familiar one, such as Coldwell Banker, Re/Max or Prudential. But it may be a local concern, or even a private individual. In any case, the broker is licensed to list and sell homes in that particular state.

The broker determines how its own agents will be compensated. Agents are usually compensated on what is called a "commission split," meaning that an agent will get a certain percentage of the commissions which that agent brings in the door. Beginning agents start at around a 50% commission split, and more experienced agents can go as high as 90% to 95% of the commissions they earn.

In addition, brokers set the minimum commission level they will accept on homes listed for sale with their firm. In theory, all listing commissions are negotiated independently between brokers and sellers.

Most often, brokers require that sellers sign an "exclusive right to sell" listing agreement. That means that the seller will pay a full commission to the broker if the home goes under contract during the listing period, usually ninety days. It doesn’t mater who or what caused the house to sell...the broker has earned his full commission.

In a further effort to make the property sell quickly, most brokers agree to cooperate with other brokers in the sale of their listed property. That means that if the buyer is working with one company and the property is listed with another, the listing broker will share half the commission with the other broker making the sale. That broker is called the selling broker, and the agent who actually works with the buyer is called the "selling agent." As we said earlier, the selling agent is probably on a commission split with his own broker as well.

Here is the important thing to remember:
In almost every case, the entire real estate commission is being paid by the seller. That is true even if the buyer has signed a buyer brokerage agreement with an agent. As long as the payment structure is fully disclosed and everyone agrees, the seller can pay for all the real estate commissions involved in almost any transaction.

It is unlikely that a buyer would ever be called upon to pay any portion of a real estate commission.

So, to give you a typical example:
You decide you want to buy a house. You hire Susie at ABC Realty to represent you in the purchase of your next home. She finds a really cute house currently listed with Joe at XYZ Realty. You make an offer of $100,000 and it is accepted by the seller. Typically, the money would flow like this: At closing, Mr. Seller has a commission of $6,000 deducted from his proceeds. Half that goes to ABC Realty, while half goes to XYZ Realty. Because Susie is a top-selling agent, she gets 80% of the $3,000 commission she generated, totaling $2,400. ABC Realty gets the other $600. On the listing side of the transaction, Joe is a new agent and this is his first sale. He gets half and his broker gets half. Obviously, as agents gain experience, they try to negotiate a higher commission split with their brokers. In a nutshell, that’s how agents get paid.