How Do Real Estate Agent Commissions Work?

What the Commission Is and Who Pays Those Fees

A real estate agent can help make the process of buying or selling a home easier to manage. Real estate agents set up showings, negotiate between parties, and can set up appraisals and inspections. A good real estate agent understands the markets for both buyers and sellers and utilizes that knowledge to facilitate a successful sale. Learn more about who pays for these costs and how they work.

What Is a Real Estate Agent’s Commission?

Real estate agents are paid on commission, which is usually determined by a percentage of the home’s sale price. The commission’s cost is typically factored into the price of the home before it’s listed for sale, and real estate agents are typically only paid when the home sells. If there is a real estate agent for both the buyer and the seller, they typically split the commission in half.

Who Pays a Real Estate Agent’s Commission?

Typically, the seller is responsible for paying both the buyer’s and the seller’s real estate agent’s commission. This is because the cost of commission is worked into the sale price of the home before it’s listed. Once the home has been sold, the real estate agents are paid as a part of that process. However, because the buyer is the one paying the sale price, they, too, are indirectly responsible for paying the real estate agent’s commission.

What Percent Commission Do Most Real Estate Agents Charge?

Real estate agent commission varies. According to Forbes , real estate commission fees are usually about 5–6% of the home’s sale price. For example, if a home is sold for $450,000, this means that the commission fees can range from $22,500 to $27,000. Since the commission is set by a percentage, the actual amount that the real estate agent receives might fluctuate, depending on whether the home is sold for lower or higher than the home’s listed price.

What Do the Commissions Cover for Buyers vs. Sellers?

A seller’s agent, also known as a listing agent, is involved in every step of the sale of the home. They help stage the home and take photos, work with sellers to determine a sale price, and list the home for sale. They are also responsible for advertising the sale, scheduling and hosting open houses, and they can negotiate on behalf of the seller.

A buyer’s real estate agent first helps the buyer decide what kind of home they’re looking for, so they can look for homes and find showings. They’ll also complete neighborhood home comparisons with a price analysis to help buyers make the best offer. Just like seller’s agents, buyer’s agents negotiate on behalf of the buyer when making an offer. Buyer’s agents can also help with scheduling home appraisals and inspections.

If there’s something specific you want from a real estate agent, be sure to ask them upfront before signing a contract to work with them.

Real Estate Agent Commission Split with a Broker

A real estate broker is typically responsible for the advertising of a home, as well as real estate office space. Brokers are, typically, companies (or people) that hire and oversee real estate agents. Brokers split the commission with the real estate agent involved with the sale. Sometimes, it’s split 50/50, sometimes it’s split for a specific, contracted amount.

Are Real Estate Agent Fees Negotiable?

Yes, real estate agent commissions are negotiable. However, because a real estate agent is not paid until the house has been sold, the actual amount they’re paid will not be known until the sale happens. Negotiations about commission should happen when the buyer or seller decides to work with a real estate agent, and they begin discussing a contract.

Last reviewed and updated March 2024 by Freedom Mortgage.