How Real Estate Commissions Work (and How to Maximize Yours)

Behind every successful real estate agent is a clear understanding of how real estate commissions work. Knowing how commissions are earned, divided, and maximized gives you control over your income and helps you grow your business on your own terms. When you understand the structure, you’ll see that real estate offers both flexibility and the potential for lasting financial success.

Let’s explore how real estate commissions work, how they’re split, and effective ways to increase your earnings as you build your career.

1. Understanding Real Estate Commissions

A real estate commission is the percentage of a property’s sale price paid to the agents who represent the buyer and seller. It rewards agents for marketing a home, negotiating offers, and managing the transaction from listing to closing.

In most markets, real estate commissions range between 5% and 6% of the sale price. For example, if a home sells for $400,000 with a 6% commission, the total fee equals $24,000. The buyer’s agent, the seller’s agent, and their brokerages each receive a share of that amount.

The seller usually pays this fee at closing and deducts it from the sale proceeds instead of paying it directly. Understanding how real estate commissions work helps new agents estimate income potential before choosing a brokerage.

To learn more about how agent compensation works, visit the Federal Trade Commission’s Real Estate & Mortgages resource.

2. How Real Estate Commissions Are Split

When a property closes, the total commission is divided between several parties. Both the buyer’s agent and listing agent receive a share, and each splits their portion with their brokerage according to their agreement.

Here are a few common commission structures:

• 50/50 split: Standard for new agents who receive additional training and leads.

• 60/40 or 70/30 split: Experienced agents often earn a higher percentage.

• Capped model: After paying a set amount to the brokerage, agents keep 100% of future commissions for the remainder of the year.

Before joining a brokerage, review your commission split carefully. Some firms provide tools and mentorship, while others offer more independence.

New agents can also learn how to select the right brokerage model through RealEstateU’s About Us page. You can also explore career tips and professional insights on RealEstateU’s Career Hub to better understand how real estate commissions work and what to expect when joining a brokerage

3. Typical Rates and Who Pays the Commission

In most transactions, the seller pays the commission, which is divided between the buyer’s and seller’s agents at closing. This arrangement keeps things simple for buyers, who typically don’t pay their agent directly.

While 5% to 6% is the most common range, commission rates can vary depending on property type, price, and local market conditions. In competitive areas, some agents lower their rates to attract listings. Others keep standard rates by offering stronger service and negotiation.

In different markets, how real estate commissions work can vary based on competition and property type. To explore market data that influences commission trends, you can review the U.S. Census Bureau’s housing market data.

4. How to Maximize Your Real Estate Commissions

Understanding how real estate commissions work is the first step. The next is finding ways to increase your income and build consistency in your business.

Negotiate Better Splits

Once you’ve proven your ability to close deals, discuss your performance with your broker. Many agents who consistently bring in sales are able to secure higher splits or move into a capped model that lets them keep more of what they earn.

Target Higher-Value Properties

Since commissions are based on a percentage of thesales price, working with higher-priced homes will naturally raise your income. Consider branching into luxury, commercial, or investment properties as your expertise grows.

Build Strong Client Relationships

Satisfied clients often become repeat customers or referral sources. Stay in touch after closing with personalized check-ins, local market updates, or homeownership tips to maintain long-term relationships.

Continue Learning and Improving

Successful agents invest in education. RealEstateU’s Online Real Estate Courses let you study at your own pace while gaining practical knowledge about contracts, marketing, and negotiation—skills that directly increase your earning potential.

Market Yourself Consistently

A strong online presence helps establish credibility. Use social media, testimonials, and local networking to build a recognizable brand. The more visible you are, the easier it becomes to attract motivated clients who value your service.

5. Planning for Consistent Income

Learning how real estate commissions work can also help you plan income consistency throughout the year. Real estate income can fluctuate, especially in your first few years, so planning ahead helps smooth out those ups and downs. Set aside a portion of every commission for taxes and business expenses, and create a budget that accounts for slower months.

Balancing buyer and seller clients can also stabilize your pipeline. Adding rental or referral opportunities gives you additional income streams that support steady cash flow year-round.

If you want to compare agent earnings by state or experience level, visit the Real Estate Salary Guide.

Advance Your Real Estate Career with RealEstateU

Mastering how real estate commissions work is the foundation for building a thriving career. With the right knowledge, consistent effort, and ongoing education, your income can grow steadily as your skills and confidence expand.

RealEstateU offers flexible, affordable online courses that help you meet licensing requirements, develop practical skills, and grow your business at your own pace. Whether you’re starting out or looking to take your career to the next level, RealEstateU provides the structure and support to help you succeed.

Building your expertise takes time, but every step you take brings you closer to lasting success in real estate. Start learning today and turn your potential into progress.