Most people choose to work with a real estate agent when buying or selling a house. Unlike an hourly or salary employee, a real estate agent doesn’t get paid based on their work hours. Real estate agents at traditional brokerages are independent contractors and get paid on a commission basis. The commission they earn is a percentage of the home’s purchase price. This differs from how Redfin agents are paid, which we’ll dive into a bit later. First, let’s take a closer look at how real estate agents get paid at traditional brokerages.
Who pays the real estate agent?
Typically, the real estate agent is paid when the home purchase closes – when the money for the sale changes hands from buyer to seller. The commission payment is usually a cut of the sale price from the seller’s home sale proceeds. The seller and their agent may even take commission into account when they set the initial listing price of the home. The buyer usually doesn’t have to pay commission, though they still need to pay closing costs.
A common commission range is 4–6% of the contracted sale price, split between the seller’s agent and the buyer’s agent. For example, if a home sells for $300,000 with a 6% commission, the total commission earned would amount to $18,000 and typically split 50/50 between the two agents.
The average sale price across the U.S. housing market was $376,278 in January 2022. At a rate of 6%, the commission paid on the national average sale price has been about $22,500.
How is the real estate agent commission set?
The commission rate on the sale of a home is negotiable. While a 4-6% commission rate has been typical for many years, some brokerages have moved to a flat fee arrangement, and others offer discounted rates.
Commission pays the agent for their services throughout the home buying or home selling process. Real estate deals fall apart daily due to lengthy negotiations, contract issues, a missed time frame for repairs, or failed…