Many real estate agents truly love the job and the industry. But realistically, a Realtor still needs to pay the bills. Real estate commission can be highly variable. Not only does it depend on the local real estate market, but it also depends on the broker the Realtor works with. So, how much commission does a Realtor make?
What’s in a Commission, Anyway?
What’s the first thing any new real estate agent wants to know? How much they can expect in commission. Many people assume that the entire Realtor fee goes to the real estate agent. But a real estate agent usually has to share their fee with the real estate broker they work under — and both the listing agent and buying agent split the fee.
A Realtor can make a lot of money, but it’s not all at once, and it does take work.
The full commission on a real estate sale is usually 4% to 6% of the sale. This money is split four ways: listing agent, listing broker, buyer’s agent, buyer’s broker.
Let’s say you’re the buyer’s agent. You’re selling a small, $100,000 house at a 6% commission — $6,000. You, the buyer’s agent, get $3,000. The listing agent also gets $3,000. Both the fees for the buyer’s agent and seller’s agent will be included in the closing costs.
But you don’t walk away with the $3,000, because you still need to pay your brokerage. Some brokers charge up to 50%. Often, it depends on how long you’ve been with the managing broker and how many clients you have. At the end of the day, you may be walking away with between $1,500 and $2,400.
How Can You Increase Your Real Estate Commission?
In the real estate business, a real estate agent is in ultimate control of how much they make. A real estate agent can increase their real estate agent commission in a few ways:
- Being both the buyer’s and seller’s agent. If you list a property and then find a buyer for it, you get the full commission, rather than having to split it with the other agent. This is called dual agency.
- Negotiating better rates with your broker. You might need to go to another broker if your current one is too expensive or if it’s just not a good fit.
- Negotiating a higher sale price for your listings. As a seller’s agent, it’s in your interest to make sure your sellers get the best price for their house, every time.
- Selling more houses. Real estate is very much a numbers game. If you can’t increase each individual commission, you can increase your total real estate commission by selling more properties.
- Getting into bigger markets. Waterfront properties and luxury properties are naturally going to make more money for a Realtor, though they may be more of a challenge to sell.
- Providing additional services. A real estate agent can provide services such as home staging for their listings, as well as sell packages such as superior photography and videos.
Your actual commission rate isn’t likely to waiver from 4% to 6% total. The ceiling is going to be set by the area you’re in, even with negotiations. But the amount that you, as a Realtor, make in commission is somewhat under your control because you can always do more.
How Do You Negotiate Realtor Commission?
Everything in real estate is, of course, negotiable. For the most part, it’s the seller who pays out commission from their closing costs. So, it’s the seller who is most likely to try to negotiate.
A Realtor can agree to any commission they want, but they should stay within the 4% to 6% spectrum; otherwise, their agent commission just isn’t going to cover their own costs.
New agents may feel compelled to reduce their agent commission purely to secure sales. In the long run, this often isn’t the answer; it only encourages the client to be more demanding.
But a real estate brokerage can also provide more guidance on how an agent should price themselves and how they can increase their revenue per real estate transaction.
A lot of Realtors don’t have a lot of control over their agent fee, but they do have control over the houses they sell, how much they sell for, and how much work they put into it.
How is the Commission Paid to the Realtor?
Real estate commissions are paid once the home sale is closed. If you’re interested in a real estate career, you will need to be prepared to wait. A closing can take anywhere from 30 to 45 days, depending on how complex the sale is, and how sluggish the mortgage lender is. (
Cash sales can go much faster, but they’re rare.
While doing their due diligence, the escrow company will collect the money from the buyer. They will then pay out the seller, the agent’s commission, and other closing costs (such as inspections, property taxes, and other fees). The home buyer will then receive the deed once everyone has been paid.
Whether you’re the buyer’s agent or the selling agent, you’ll have to be aware that the sale can fall through. And if the sale does fall through, you’re not going to make a thing. If you can’t sell the property, you’re not going to make a thing. This is part of the uncertainty that can be inherent to being a real estate agent or associate broker.
FAQ on How Much Commission Does a Realtor Make
Who pays the commission with an FSBO seller?
The seller usually pays Realtor fees for both the buyer and the seller. So, who pays if you’re working with a home that’s for sale by the owner? Sometimes, you can negotiate that the seller pays the fees. But this can be a hard sell because often the FSBO seller is intentionally trying to avoid the cost of an agent or brokerage. In that case, you’ll have to ask your buyers if they’re willing to pay a buyer agent fee directly.
How much does the average real estate agent make?
With very few exceptions, the average real estate agent salary is $0. Most real estate agents don’t get a salary; they need to be supported by commission. The average real estate commission is going to vary depending on the area. According to the Bureau of Labor Statistics, the average real estate agent makes about $51,220 a year.
How much do commercial real estate agents make?
Commercial real estate agents usually have a lower commission percentage because the properties they are selling are much higher in value. But they may make just as much money — it’s just a smaller percentage of the sale. A home sale could be $250,000, whereas a commercial sale is going to be closer to $2,500,000.
Do real estate agents ever make more than just commissions?
Real estate agents don’t make a salary. But they can make a referral fee, especially once they have become established in the business. Some real estate agents may also sell additional services, such as listing photographs, staging, and more.
There are also real estate agents that work with rental properties rather than purchased properties, draw up paperwork such as a listing agreement or rental agreement, etc. A rental agent will make fees based on the lease prices.
Does an experienced Realtor make more?
There isn’t that much difference between a sales agent who has just achieved their real estate license and a seasoned professional in terms of their commission fee. Rather, it’s that an experienced real estate professional will be able to sell houses for more and faster.
Final Thoughts on How Much Commission Does a Realtor Make
While you might have less stability with a commissions-based income, you’ll make up for it with more flexibility and freedom compared to an hourly wage or annual salary. You can make as much or as little as you choose.
What are your thoughts on a commissions-based income? Let me know in the comments below!
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