How Much Commission Do Real Estate Agents Make?
Real estate agents make money by earning commissions from the sale or purchase of properties. Sellers are obliged to pay the agreed commission which is split between the broker and agent. But the specific amounts and percentages can vary depending on many factors such as the agent's experience, the market, the price of the property and more. So how much commission do real estate agents make on average?
The standard commission percentage
The average real estate commission is typically between 4.5% and 6% of the property’s sale price. The money is split between the seller's agent and buyer's agent.
The commission percentage can vary depending on the market, the agents involved, the price of the property and other factors. For example, in some locations, the commission may be lower, such as 5% or 4.5%, while in others, it may be as high as 7% or even 8%.
Agents can also negotiate their commission with the seller, so it's important to be aware that the percentage isn’t set in stone.
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How is the commission split?
How much do real estate agents make in commission? In most cases, the commission is split 50/50 between the seller’s agent and the buyer's agent. So, if the total commission is $12,000 the listing agent would get $6,000 and the buyer's agent would also receive $6,000.
The real estate agent splits the money with the broker. In most cases, the agent gets to keep 50% of the commission. The other 50% goes to the broker. So, in the example above, both the agent and the broker would get $3,000.
Who pays the agent?
The real estate agent's commission is typically paid by the seller at closing, from the proceeds of the sale. But there are cases when the buyer is responsible for paying the agent's commission.
For example, if the buyer is purchasing a home that's listed as "buyer's agent commission paid," this means that the buyer will be responsible for paying the agent's commission. In this case, the commission will be added to the buyer's closing costs.
What does it mean for sellers?
If you're selling your home, you'll be responsible for paying the real estate agent's commission. This is typically between 4.5% to 6% of the property's sale price.
Keep in mind that the real estate agent's commission is negotiable.
What factors affect the commission?
Since you know what commission real estate agents make, it’s time to discuss the factors that affect it:
- The real estate market
- The type of property
- The agent's experience
- The agent's results (top-performing agents charge a higher commission. They have a proven track record of getting the job done)
- The location (agents in larger cities or areas with a higher cost of living usually charge a higher commission)
- The price of the property
Commission-based salary - pros & cons
There are both advantages and disadvantages to working on a commission-based salary.
Some of the pros include:
- Potential to earn a lot of money
- Control of your income (the more you work, the more you earn)
- Freedom to work when you want
On the other hand, the most serious cons are:
- If the sale doesn't close, you don’t receive a commission, despite your hard work
- You have to learn to deal with rejection
- You have to constantly be working to make sales
How much commission do commercial real estate agents make? It really varies and depends on many factors, such as the agent's experience, the market, or the price of the property. But on average the commission is between 4.5% to 6% of the sale price. The money is split between the seller’s agent and the buyer’s agent.