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How Much Does a Real Estate Agent Make on a Home Sale?

Apr 29, 2024 2:00:00 PM / by Matt McGee

When selling a home, one of your biggest expenses might be the cost of your Realtor®. The amount you pay your agent can have a significant impact on how much you make from the sale. 

Many people know that real estate agents are paid on a commission basis, but the details beyond that are often a mystery. And many agents say homeowners rarely ask how they get paid and how much they’ll make from selling a home.

“Generally, I don't get a lot of questions about it, but I'm happy to talk about it anytime,” says Marti Reeder, a veteran agent based in Kent, Washington. “I explain to them that they're not paying me now—they're paying at the end [of the transaction].”

In this article, we’ll open the curtains on how real estate agents are paid and how much they typically make when selling a home. We’ll also address recent industry developments that may impact how much agents earn while giving homeowners new options for how they’ll pay their Realtor. 

How real estate agents are paid 

Real estate agents typically work on a commission basis. They don’t get paid until after a home sells. Their commission is not an additional fee; it gets paid from the proceeds of the sale. 

This means that a listing agent—i.e., the agent you hire to help sell your home—will typically pay for all marketing expenses, such as photography, videography, online and traditional ads, etc., out of their own pockets. 

Some agents also pay for professional staging to make the home more appealing to buyers; others pass that cost to the homeowner. If the home doesn’t sell, the agent doesn’t get paid. 

(Note: In that case, you might need to reimburse your agent for those upfront costs. Discuss that when you interview agents and be sure you understand the fine print of your contract.)

Likewise, the agent representing the buyer doesn’t get paid until after the home sells. A buyer’s agent doesn’t have the same upfront marketing and business costs as a listing agent, but they usually make a bigger investment of time educating their clients, taking them to look at homes, writing offers, and so forth. A buyer’s agent can spend weeks or months working with a buyer and earn nothing if the buyer changes their mind about buying a home or switches to another agent. 

Not all agents work on a commission basis:

  • Some receive a salary from their brokerage. 

  • Some agents charge a flat fee to homeowners for a fixed set of services. 

  • Others take the flat fee idea a step further by offering a menu of individual, fixed-price services. 

Arrangements like these have historically been rare, but could become more common in light of recent industry developments that we’ll address later in this article, which we’ll discuss later in this article.

How real estate commissions work

Now that you understand how and when agents are paid, let’s dive deeper into the commission itself since it’s the most common way a real estate agent is paid.

Historically, a commission is negotiated up front between the homeowner and the listing agent. The commission is usually a percentage of the final sales price of your home. 

There’s no “set commission” that an agent must charge. Typically, listing agents will charge 5%-6% to represent you in the sale of your home. But you may encounter “discount” or low-commission agents who charge as little as 1% (usually while providing fewer services and support). On the other hand, there are some agents who charge as much as 8%-10% depending on the type of property, price, and other factors. 

A listing agent will typically offer to share their commission with the buyer’s agent. This is called “cooperative commission”—the National Association of Realtors created this arrangement in 1913. It’s seen as a way to bring more buyers into the market by not forcing them to pay their agent’s fees in addition to the cost of the home.

While it’s often said that the listing agent shares their commission with the buyer’s agent, the commission that you pay as a homeowner is divided between four parties, not two:

  • The listing agent

  • The listing agent’s brokerage

  • The buyer’s agent

  • The buyer’s agent’s brokerage

It’s rarely an even four-way split. Brokerages have different business models and keep different amounts of the commission to cover the costs supporting their agents. 

“I'm with a brokerage company (John L. Scott) that provides a lot of services to support me and my client, which can increase your views and opportunities on your listing. So I owe them money for that,” Reeder says.

When you sign a listing agreement with an agent to sell your home, that contract is actually between you and the agent’s brokerage. The contract states that you’re hiring the brokerage to list and sell your home, and designates the agent you’ve selected as the brokerage’s representative.

That’s important to know, because when sale proceeds are distributed, the brokerages are paid whatever percentages you agreed to as the homeowner. Then, it’s each brokerage’s responsibility to pay their agents for helping the seller and/or buyer. 

Some brokerages keep as much as 50% of the agent’s commission on every home sale or purchase. Others may keep as little as 0% while charging the agent a flat fee for its services and support.

Further, if an agent is part of a real estate team, the team may also keep a percentage of the commission before the agent is paid.

How much do real estate agents make on a home sale?

So now we’re back to the question of: How much do real estate agents make? The answer is that it depends on a number of factors. Let’s look at the sale of a $500,000 home.

A 6% total commission amounts to $30,000. Then the agent would typically subtract around 3% offered to the buyer's agent, amounting to $15,000. The amount remaining is $15,000.

Next, you have to account for the brokerage split, which can vary based on the brokerage.

If the listing agent’s brokerage is keeping, that’s $7,500 — leaving the agent with $7,500 to take home.

If the listing agent's brokerage takes a 20% cut, that’s $3,000 — leaving the agent to take home $12,000.

Of the total $30,000 commission, the listing agent stands to make between $7,500 and $12,000 depending on the brokerage split examples above. That comes out to 1.5%-2.4% of the sale price. 

If the agent is part of a real estate team, the team may keep a percentage of the commission, too. If this happens, the team’s cut is usually 10%-50% depending on a number of factors. So, if we apply a 30% team cut in our $500,000 example to the listing agent’s $7,500 to $12,000 earnings, the agent keeps between $5,250 and $8,400. That brings the agent’s pay to 1.05% to 1.68% of the home’s sale price.

That amount doesn’t account for 

  • federal and state income taxes, which agents have to pay themselves as independent contractors

  • business expenses such as professional photography, videography, advertising, etc.

  • other expenses, ranging from license fees to salaries they pay their own support staff

“I have to pay memberships with the National Association of Realtors and the MLS,” Reeder says. “Then I pay fees to my brokerage, John L. Scott, and then I have to pay the support team who's going to help us get to the closing table.”

Although public perception is that each agent makes 2%-3% when a home sells, that amount doesn’t include the brokerage’s share, the team’s share (if applicable), and other business expenses associated with every home sale. 

The changing landscape of how agents are paid

In March 2024, the National Association of Realtors (NAR) proposed a landmark settlement in a class-action lawsuit over agent commissions and how buyers’ agents are paid. If the settlement is accepted, it could impact how and how much agents are paid. If the Department of Justice intervenes with additional demands, the changes could be significant.

One possible outcome is that listing agents (and homeowners) will no longer be expected to offer a portion of their commission to buyers’ agents. This might lead to a variety of new payment arrangements:

  • Listing agents could lower their commission to 2%-4% while the homeowner decides if and how much to offer the buyer’s agent. 

  • Listing agents could switch to a flat-fee listing model with a fixed price for selling a home.

  • Listing agents could adopt a menu of services model where you select and pay for a specific set of services.

Although it’s too soon to make predictions, industry experts generally see the settlement having a larger impact on how buyers’ agents are paid and how much they earn. If the settlement forces more buyers to pay their agents directly, and if those buyers can’t afford that or choose not to use an agent, listing agents could earn more from having to do the work of two agents.

Regardless of how the lawsuits and settlement impact what you’ll pay, the expertise and value that an experienced agent provides will remain crucial for a successful sale.

The value a real estate agent offers during a home sale

Recent headlines have led many buyers and sellers to question a real estate agent’s value—and not only the headlines about the lawsuits and settlements. 

More than 3 million people have an active license, according to the Association of Real Estate License Law Officials. But a recent report from the Consumer Federation of America says 49% of licensed agents sold one or no homes in 2023. 

With a glut of agents, many of whom are part-timers with few sales to their credit, it’s no wonder that people are questioning if real estate agents are overpaid.

“There are plenty of listing agents out there who do very little and deserve a fraction of what they get paid,” says Blair Ballin, a top agent in Phoenix. “There are [also] plenty of listing agents who deserve every single penny of what they're getting, whether it's a $500,000 home, let's just say the commission's $15,000, or a million-dollar home and the commission's $30,000.”

Great listing agents earn their commission by doing much more than adding your home to the MLS and putting a “For Sale” sign in the front yard. Here’s some of the value you’ll get from an experienced, skilled listing agent:

In-depth market knowledge: Great listing agents understand that the market determines a home’s value and understand how to price your home to attract buyers.

Marketing and networking: They aggressively market your home to the right audience and use their network and connections to find buyers who are already in the market.

Negotiating skills: Listing agents represent you and know how to fight for your wants and needs while not pushing so hard that it turns buyers away.

Legal and contractual knowledge: They know the details of the complex paperwork and legal requirements involved in every sale, and ensure that you’re protected through each step of the selling process.

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Matt McGee is a writer and editor who's been immersed in the real estate industry his whole life. Matt's dad was an agent for nearly 50 years, his sister is an agent, and his wife has been a Realtor® since 2004. 

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