Real estate agents don’t earn a salary. Instead, they generally make money through commissions, getting paid only when a deal closes. This means they can work with a client for months without receiving a paycheck.
But when a deal goes through, who pays the agent and how much? Can you negotiate real estate broker fees or the closing costs associated with them?
Allow us to tell you helpful information to know about real estate commissions, from who pays what to where that money goes during a real estate transaction.
Who pays the commission?
In the past, the full commission for both the listing agent and the buyer’s agent (assuming the buyer had one) often came out of the proceeds of the home’s sale.
However, as of August 2024, new commission guidelines have changed how agents are paid. Now, sellers pay their listing agent, while buyers are responsible for their own agent’s commission.
As a seller, you can still choose to offer compensation to a buyer’s agent. Why? To make your listing more appealing and potentially attract more buyers.
What does the real estate agent commission cover?
While it’s possible to buy or sell a home without a real estate agent, navigating a home sale is a complex process that requires expertise and careful attention to detail.
Real estate agents shepherd homebuyers and sellers through this process, providing a wide range of services, including pricing, marketing, negotiating, and ushering the home sale through closing.
Beyond their technical skills, agents provide something just as valuable: peace of mind. Moving is one of life’s most stressful events, and a good agent acts as a steady, experienced guide to help you through it.
Are real estate agent commission fees negotiable?
You can negotiate commissions, but keep in mind that agents often invest their own capital into marketing a property, so a lower commission could mean less advertising for your house.
That being said, it doesn’t hurt to ask for a lower commission. Most agents won’t take offense, and the worst thing they can say is no. Or, if you’re truly tight on cash—say, because you’ve maxed out your budget buying your next home—you could opt for a transactional agreement.
In this arrangement, the listing agent will help you set an asking price, facilitate communication between you and the buyer, write the contract, and move the process along to closing for a flat fee or lower commission. You won’t get the benefit of the agent’s full services, but it’s worth considering for some transactions. Not all agents offer transactional agreements, so you may have to shop around to find one.
Bottom line: Buying and selling a home are likely to be among the biggest financial transactions of your life, so be sure you find an agent you trust to do a great job. This is not the time to shop solely on price.
How much can real estate agents make?
How much an agent makes will depend on where they live and their niche. Since commissions are often calculated as a percentage of the home sale value, agents who live in areas with higher median home values or work with clientele in higher-value properties often earn more.
On average, real estate agents make about $50,000 annually, with luxury agents earning an average of $119,000 per year.
Anything else I need to know about commission fees?
The contract you sign when you hire a real estate agent should outline all of the details about the agent’s total commission (and any transaction fees the agent charges).
However, rental agents operate a little differently. In many cases, landlords cover the rental agent’s fee, but in competitive markets like New York City and Boston, tenants are often responsible for these costs, Doug Quattrocchi, a landlord and the executive director of Mass Landlords, shared in an interview with CBS News.
As a seller, you want a real estate agent who can broker the best sales price and terms for you. However, good agents aren’t cheap. As with most things in life, you get what you pay for.
To learn more, check out our Guide to Real Estate Commissions, which covers everything homebuyers and sellers need to know.
