Real estate agents are paid on commission, which is typically 5% to 6% of the home sale price. The listing agent and selling agent usually split the commission in half, but it's ultimately decided by the person selling the home.
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To make money as a real estate agent, realtors need to embrace the hustle and hope for a bit of luck. How much an agent makes will depend on how many homes they manage to sell or find buyers for, what kind of commission splits they negotiate, and what types of homes they help sell.
For a home priced at $414,200 (the median sale price in May 2022), a real estate agent could make anywhere from $10,355 to $12,426. Selling more expensive homes mean larger commissions, since real estate agents fees are based on the sale price of the home they list or help a buyer purchase.
It’s hard to pin down an exact amount that real estate agents make because where they work also plays a major role in their income; realtors can make anywhere from $34,000 to $176,000 a year, or more.
How much do real estate agents make per sale?
When you sell a home, and hope to make a profit, you may wonder how much your real estate agent is going to make off the sale.
While the standard commission the seller pays is 6% of the home sale price, that commission is negotiable. The listing agent and their client (the seller) are responsible for agreeing on a commission fee structure. Listing agents and buyers agent typically split the fee and make 2.5% to 3% of the final sale.
Average commission of realtors
After a sale, how much of the commission the listing agent actually receives may be far less: The listing agent has to split their commission with the buyer’s agent. Often, this is an even split, but the seller may choose to negotiate an uneven split. For example, the seller may decide that the listing agent gets 4%, and the buyer’s agent gets 2% of the total commission.
Once the commission is divided between the two agents, each agent will then split their commission with their broker. There is no exact standard here: Every agent will have a different arrangement for how they split their commission with their broker. Typically, newer agents take a smaller commission split than ones who are more experienced, or who sell a lot of pricey properties. (Technically the seller pays the broker, and they’re the ones who pay the agent.)
Example: How real estate commission is calculated
Let’s say a listing agent sells a home for $500,000. The realtor fees are set at 6% commission rate, with 3% going to each agent. The agents also have an equal split with their brokers. Once the transaction closes:
- The seller pays $15,000 in realtor fees.
- The listing agent and buyers agent each get $7,500, after dividing the commission in half.
- The listing and selling agent make $3,750, after splitting with their respective brokers.
How is commission determined and who pays the agent?
The home seller pays the real estate agent’s commission, but the fee is subtracted from the proceeds of the sale (which, of course, the buyer supplies the money for). Most sellers can account for the realtor fee in the listing price of their home.
How large of a commission percentage real estate agents make depends on the terms spelled out in their contract with the seller. (This contract ensures the agent gets paid once the property sells.) While most agents are paid around 6% commission, the exact amount can vary. Agents may offer to lower their fees, and it's always worth negotiating with them. However, in a hot market, it may be harder to get a deal.
Sellers may feel frustrated when they have to hand over a chunk of their profit after they sell their home, but there’s a lot of work and expense that goes into a real estate transaction. Both listing agents and their brokers spend time and money to advertise a home and to prepare it for sale.
If the home doesn't sell, the seller typically doesn’t reimburse these costs to the agent — the agent and their brokerage are taking on that risk and the relate expenses upfront. They also make it easier and less stressful to sell or buy a home, so it’s important not to underestimate the value they bring.
How much do real estate agents make per year?
The median annual pay for real estate agents in 2021 was $48,770 according to the U.S Bureau of Labor Statistics. Brokers earned an average of $62,010.
It’s important to remember that these are nationwide numbers and that many agents earn a lot less, or a lot more, than the median salary. For example, the highest 10% of real estate agents earned more less $34,070 and the top 10% of brokers earned more than $176,080.
- Low-end salary: $34,979
- Median salary: $62,010
- High-end salary: $176,080
How much an agent earns depends on how much they sell, how they choose to split commission with their brokerage, and what types of properties they sell. Real estate agents that live in an area with high property values (like a big city, like New York) generally earn a much larger salary without necessarily doing any more work than agents who work in sleepy suburbs.
Because most real estate agents are paid on a commission-only basis, how many houses they sell also determines how much money they will bring home. However, some agents do receive a base salary plus bonuses from their firm, but this is more common amongst agents employed by large companies.
How much do real estate agents make per hour?
Realtors aren't usually paid by the hour, and clock in more than 40 hours a week. The hourly pay is around $23.45 per hour.
What happens if a sale doesn’t close?
Despite their best efforts, every agent will likely come across a property they just can’t seem to sell. Real estate agents don’t earn commission until the home they’re listing sells or they find a buyer for a home. Listing agents spend a lot of time and money when they attempt to sell a home and it is very frustrating when months of effort go unrewarded.
In some cases, the broker is still eligible to make money even if the home one of their agents is attempting to sell doesn’t close. If a buyer is ready and able to purchase the home, the broker may be entitled to a commission even if the seller:
- Decides they don’t want to sell
- Has a spouse who signed the listing agreement but won’t sign the deed
- Has a title with uncorrected defects
- Commits fraud in relation to the sale of the home
- Can’t deliver possession to the buyer within a reasonable amount of time
- Insists the buyer meet terms that aren’t listed in the listing agreement
- Comes to a mutual agreement with the buyer to cancel the transaction
For those curious about how much the real estate agent they plan to work with is likely to make, you can get a pretty good idea by calculating what 6% of your ideal sale or purchase price will be and then dividing it by four. Until you get a contract in place, you won’t know the exact commission amount and even then, you’re unlikely to know what the split between agent and broker will look like.