How Does Real Estate Commission Work?

real estate commission

Real estate agents are a matchmaker between the home buyer and the home seller. When a match is made, they facilitate the sale of the real estate property.

Their job responsibilities may include arranging for photos to be taken of your property, listing it, scheduling showings, handling negotiations, and drawing up the contract that outlines the terms and conditions of the sale

How do they get paid for this work?

Real estate agents work for commission.

If you hire a real estate agent to help you buy, sell or rent a house, that person will get paid a commission. Unlike jobs that either pay hourly or a salary, real estate agents only get paid when a transaction is finalized.

Some real estate agents may opt to charge a flat-rate fee for their services. However, for home sales, it’s more common for them to receive a percentage of the sale price of the home. The percentage is typically 5 to 6 percent of the final sale price, according to

Let’s say the home sells for $350,000, for example. The commission would be $21,000. That’s a big chunk of change, right? That entire commission, however, doesn’t go straight into a single real estate agent’s pocket.

The real estate commission is split multiple ways.

If the home buyer and the home seller each have their own real estate agent, the commission will often be split evenly between the two agents. That means the $21,000 commission from earlier would now become $10,500 per real estate agent.

After that, each individual agent splits the remaining commission ($10,500, in this example) with their real estate broker or agency. Every real estate transaction must be overseen by a real estate broker. This person (or agency) is responsible for the transactions of any of the real estate agents who work underneath them.

Sometimes, the real estate agent and broker will split the commission down the middle. The amount the broker takes can vary, however. Now, the real estate agent has made $5,250 from a $350,000 home sale. In other words, they received 1.5 percent of the 6 percent commission.

Who pays the real estate commission?

It’s customary for the seller to pay the agent’s commission. If both the buyer and the seller have their own real estate agent, the seller will typically pay the commission for both sides. The commission is typically built into the price of the home and, upon closing, is taken out of the final sale price. Just because it is the common way of doing things does not mean it’s the only way. If you decide to sell the home yourself — without an agent — you do not have to pay the real estate commission. If the buyer hired a real estate agent, it would be their responsibility to pay them.

You might be able to save on fees by selling the house by owner. However, that also means that you would be responsible for posting the listing, fielding calls from prospective buyers, showing the house, and negotiating the price. The process is definitely not intuitive for first-time sellers.

Bypass the Real Estate Commission

There’s a way that you can bypass paying a real estate commission or having to find a buyer on your own. The Buy Guys pay cash for single- and multi-family houses, townhouses, or apartment properties “as is” in Florida, Georgia and Alabama. In as few as five minutes, we can make you a cash offer using our advanced buying tools.

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