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When you’re selling your house, you may wonder how much your real estate agent will make from the sale. Most real estate agents are paid through commissions, which are calculated based on the sale price of the home. The average commission rate is between 5% and 6%, which is typically covered by the seller.
We’ll explore agent commissions and how they’re split among listing and buyer’s agents and their brokers, as well as the factors that influence their earnings.
How real estate agents are paid
Real estate agents predominantly earn their income through commissions, a percentage of the home’s sale price. When a property is sold, the commission is typically split between the listing agent and the buyer’s agent, and from there, a portion is given to their respective brokerages.
While commissions remain the standard, some agents might also charge a flat fee or work for a salary, particularly in certain discount brokerages or specialized real estate firms. Nevertheless, the commission-based model is the most common, as it ties an agent’s compensation directly to their performance and the final sale price of the property.
Understanding commission structures
The national average real estate agent commission is 5.8% of the sale price of a home. This commission typically gets split 50/50 between the listing agent and the buyer’s agent, and on top of that, both agents also have to split their portions with their brokers.
Let’s say your home value is consistent with the nationwide average of $410,200. With the standard 5.8% commission, that comes to $23,792. Of that, half — $11,896 — goes to your agent, and the other half goes to the buyer’s agent.
Your agent still has to divvy up their portion with their broker, and the percentage they’ll owe will vary based on the agent’s experience level — typically ranging from less than half to two thirds. Assuming a moderate amount of experience, they’re probably looking at another 50/50 split, bringing the agent’s take-home pay to $5,948.
Factors affecting an agent’s income
When considering how much real estate agents make, there are a few key variables that come into play.
Location market conditions
An agent’s local market conditions can significantly influence their income. In areas with high property values and strong demand, agents may earn higher commissions on each transaction. In less active markets, the number of potential sales may be lower, leading to less overall income.
Experience and specialization can also play a major role in an agent’s earnings. As agents gain more experience and develop expertise in certain niches, such as luxury homes or relocation, they may command higher commissions and fees.
Sales volume and transaction frequency
Busy agents who successfully close multiple deals each month will naturally earn more than those with sporadic sales.
The brokerage fees and splits that an agent agrees to with their sponsoring broker can have a significant impact on their take-home pay. Some agents work under more favorable split arrangements with their brokerage, allowing them to retain a larger portion of their commission earnings, while others might agree to higher fees in exchange for more support and resources from their broker.
Real estate agent expenses
Real estate agents, like any business owners, have to consider the costs of doing business as they evaluate their potential earnings.
One of the most significant expenses agents face is marketing and advertising costs. These can include everything from creating a professional website and hosting open houses to running ads on social media platforms and mailing out postcards to potential clients. Depending on their target market and level of ambition, agents can spend hundreds or even thousands of dollars per month on marketing activities.
Agents must also cover the costs of their own licensing, education, and continuous training to stay up-to-date on the latest industry trends and legal regulations.
They often have to pay membership fees to join the Multiple Listing Service (MLS) and local real estate boards, which grant them access to property listings and other crucial resources.
Operational costs, such as renting office space, maintaining a car for transportation, and investing in technology (i.e., smartphones, tablets, and software), can also eat into an agent’s earnings.
Balancing these expenses against their commission income is necessary for agents to ensure profitability in their business.
The value of real estate agent commissions
When you pay real estate commissions, you’re paying for the professional experience and services agents provide throughout the home sale process.
“What a lot of people don’t understand is the complexity of the real estate transaction,” Derek Whitner, a top-selling agent in the Atlanta area, says. “There are so many different parties that have their hands in the basket — from the closing attorney (if necessary) and inspector to the buyer and seller to the title company and lender. You have to juggle all of the parties involved with the transaction and make sure everyone gets what they need.”
When you sell your home with an agent, they handle that juggling for you. Your commission is paying for the expertise and logistical coordination that will likely end up boosting your bottom line.
“I try to make sure my sellers are aware of the value we add from negotiating the details, getting through due diligence, making sure that the title company is doing their job and that we’re closing on time,” Whitner says. “We’re getting our seller from point A to point B. We’re getting them to the finish line and getting the most money in their pocket in the shortest amount of time.”
Naturally, you can expect to sell your home faster and for more money when you work with a top-performing agent in your area with a proven track record of driving results. HomeLight can connect you with an agent in your market who is the best fit for your selling needs.
Frequently asked questions
Agent commissions are calculated as a percentage of the home’s sale price. The national average is 5.8%, which is split between the listing agent and buyer’s agent, and their respective brokerages.
Yes, commission fees are negotiable. Whitner notes that some agents negotiate frequently as part of a discount business model. However, the lowest fee doesn’t always equate to the most value. Agents need a viable budget to market your home effectively to fetch the highest possible price.
If an agent represents both the buyer and the seller in a transaction, known as dual agency, they may earn the full commission. However, dual agency can present a conflict of interest, and it’s not allowed in some states.
Yes, an agent’s experience, specialization, and reputation can influence their earnings. Experienced agents or those specializing in high-end properties may charge higher commissions, but they also often bring a higher level of expertise and resources.
In most cases, you only pay the commission if the house sells. However, the terms should be specified in your listing agreement. Be sure to read it carefully and discuss any questions with your agent
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