Working with a realtor or real estate agent can make the process of buying or selling a home easier. But they don’t work for free.
Agents get paid through commission, which depends on factors such as the commission the seller has negotiated, the sale price of the home and if the home sale closes at all. Find out here how much real estate agents get paid and who gets paid.
How do Real Estate Agents and Realtors® get paid?
In many industries, professionals are paid an annual salary. But real estate agents and realtors are usually paid by commission. The commission is their compensation for marketing a property with multiple listing service (MLS) and real estate websites such as Zillow, hosting shows and open houses and handling the paperwork.
While agents may charge a flat fee in some states, a commission based on the sale price is the most common way for real estate agents and realtors to get paid.
According to the Bureau of Labor Statistics, the median income of real estate agents in May 2020 was $60,370 per year.
You can see from the average earnings that the income range for real estate agents is very wide. How much a real estate agent earns depends on many factors, such as the part of the country the agent operates in, the number of transactions they complete, the commission rate and the commission split.
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realtor vs real estate agent
Even though both real estate agents and real estate agents are professionals in the real estate industry, there are significant differences between them. A Realtor who is a member of the National Association of Realtors® (NAR), the largest trade association in the US, is expected to uphold the organization’s standards and code of conduct.
A real estate agent is licensed to help people buy, sell and rent real estate. To become one, they must complete the required courses and pass an exam in their state. But they are not necessarily members of the NAR.
Real estate agents can act as a listing agent and work with sellers to list homes, or as a buyer’s agent to help people search for properties. Depending on the state in which they work, they may have to continue their education and renew their licenses every few years.
How much are real estate commissions?
Real estate commission rates are not set by any federal or state laws. The realtor commission or realtor fee is usually calculated as a percentage of the purchase price of the home and is often 5% to 6%.
If the real estate commission on a home is 6%, the listing agent will not collect it all.
Instead, the listing agent and the buyer’s agent will split the money. The probability of each of them will be 3%.
Who Pays the Real Estate Agent Commission?
Real estate commission checks are typically taken out of the seller’s proceeds on the sale of the home. So if you’re the buyer, you probably won’t have to pay anything in commission. But you will probably be responsible for your own closing costs, which cover expenses such as the appraisal and title to your home.
The listing agent will split the commission with the buyer’s agent, based on their negotiations. In some cases, if you signed a buyer’s agreement with an agent, you may be on the hook for additional fees.
Even though most real estate agents do not offer any type of contract to buyers, be sure to read them carefully before signing any agreement. This can help you avoid hidden fees and surprise charges.
Are Real Estate Agent Commissions Negotiable?
Depending on your unique situation and the agent you work with, you may be able to negotiate a commission percentage. A listing agent may accept a lower rate if you have previously bought or sold a home with them. They can also do this in a highly competitive market with many real estate agents competing for your business.
Additionally, if an agent knows that your property will be difficult to sell because the market is slow or it is not what most buyers are looking for, you may not have much luck negotiating. On the other hand, if an agent feels they won’t have to work very hard because your property is updated, ready to move in and likely to sell quickly, they may agree to a lower commission.
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How to negotiate a commission with an agent
An agent needs a reason to reduce his commission. So you need to do your homework and figure out why you deserve to be paid less. Maybe you have a plan to assist with their marketing strategy or professional photography.
Or perhaps you can offer them referrals or are willing to sell at a time of year when their business is slow. You can also offer to invest in repairs or improvements that will make their job easier. The more value you can create for the agent, the more likely you are to be successful in your negotiations.
If an agent seems inflexible on their commission rate, you don’t need to work with them. You can find multiple agents, so don’t be afraid to shop around for an agent that best meets your needs.
How much does a real estate agent make on home sales?
Let’s say a house sells for $300,000 with a 6% commission. The 6% commission is usually split equally between the listing agent and the buyer’s agent. In this scenario, the full commission of $18,000 will be paid directly to the brokerage firm, and Each agent would then receive $9,000.
The commission will reduce the income the seller receives from the home. Instead of pocketing $300,000, they would have to deduct $18,000. This is why some people choose to sell their home instead of working with a real estate agent.
Don’t Forget Agent Costs
While the listing agent may receive $9,000 in commissions, they are likely to incur out-of-pocket expenses when they list your home, which will reduce the total amount of money they run. in most circumstanceshandjob These are marketing costs, because agents want to do whatever they can to sell as many homes as possible.
These marketing costs can include getting your home listed on MLS, staging it, taking on professional photography and videography, creating brochures for open houses, and advertising on social media. Listing agents may also pay for licenses, association dues and other costs such as parking.
So, just because your real estate agent earned a commission of $9,000 doesn’t mean they’ll get to keep it all. For example, if they spent $2,000 marketing your property, they would only pocket $7,000.
How do agents get paid if sales go down?
If a deal happens, the agents are usually out of luck and do not receive any commission. But most agents will do everything possible to avoid this situation. They will work hard to ensure that the sale or purchase of your home closes so that they can get paid.
It’s a good idea to read your listing or buyer’s agent agreement carefully so you understand how commissions will work and are aware of any fees that may apply — even when a real estate transaction hasn’t been completed.
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