90% of people opt for a real estate agent to sell their homes. Real estate agents get paid around 3% to 6% commission. For example, on a $400,000 home sale, the total commission could amount to $24,000.
When you sell a house with an agent’s assistance, you must pay the aforesaid commission. An agent helps you set comparative prices and helps with negotiations during the sale process. You can only list your home on the MLS through an agent.
Is there a way to make any savings? Yes, you can save thousands of dollars if you sell a house via a Flat Fee MLS company. Houzeo’s Flat Fee plans get you on the MLS and eliminate the 3% listing agent commission.
How Do Commissions Work in Real Estate?
Real estate agents get paid a percentage of commission on the property value at the end of the sale. This commission is split between the listing and the buyer agent. This can be an equal split or an agreed percentage between the two parties.
Sellers usually pay these commissions. When you employ a real estate agent, you must undergo a listing agreement. This agreement outlines important details, like the commission structure, agreement duration, listing price, etc.
Example of a Real Estate Commission?
Agents cannot work independently and cannot receive any fee or commission directly from a buyer or seller. Brokers can participate in transactions themselves or hire agents to handle the work.
For example: On a home worth $500,000 with a 6% commission rate, the total commission is $30,000. The listing and buyer brokers each get 50% of the commission, i.e. $15,000 each.
Each broker, along with their respective agents, evenly split the commissions. So, for the $15,000 received by each broker (from the $30,000 total commission), they distribute $6,000 to their agents, assuming a 50-50 split as per their agreement.
Knowing how real estate agents get paid helps you understand the commission structure in a house sale.
» How to Negotiate Real Estate Commissions? Find out how you can pay less commissions to the agent.
Which Pays Better: Salary vs. Commission
The average real estate agent salary in the United States is $46,014 as of 2024. The range typically falls between $44,951 and $58,528. While on average, an agent closes around 10-12 deals a year.
Commission-based agents are generally more motivated to sell your property at the asking price. If they sell your property for a higher price they make more commission. This incentivizes agents to secure a favorable transaction.
What are the Other Income Opportunities?
In addition to commissions, Realtors can earn income through referral fees and bonuses.
- Referral Fees: The industry standard for referral fees is 25%. When agents refer clients to other agents or brokerages, they receive this fee as compensation.
- Bonus: The agent receives a bonus from the brokerage for bringing potential buyers within a specific time frame.
What Happens if the Sale Doesn’t Close?
There are circumstances where you may still have to pay the broker’s commission even if the sale isn’t finalized. You are only responsible for payment if it is explicitly stated in the contract.
- Seller’s Decision to Withdraw: When the seller chooses not to proceed with the sale due to changing circumstances or preferences.
- Deed Signing Challenges: Instances where homeowners refuse to sign the deed, delaying or halting the transaction.
- Fraudulent Practices: If there is a misrepresentation of property details or non-disclosure of relevant information.
- Failure to Transfer Property Possession: When the seller cannot transfer possession of the property to the buyer within the agreed time.
- Imposing Unauthorized Terms: Situations where one party attempts to impose terms not outlined in the listing agreement.
- Title Issues and Liens: For title defects or outstanding liens on the property which need resolution before the sale.
- Mutual Agreement to Cancel Transaction: Instances where both parties (seller and buyer) agree to cancel the transaction due to various reasons.
» Real Estate Attorneys: Discover the best real estate attorneys of 2024.
Bottom Line
A Realtor’s income is based on factors like commission structure, salary options, and additional income streams. While commissions are the primary source of earnings, agents may also receive referral fees and bonuses.
Usually, realtors take 3-6%commission when you use their services. This can increase up to 10-12% if you take closing costs and repair costs into account.
If you want to save on a part of this commission structure – consider listing on an FFM Company. Houzeo’s Flat Fee plans can help you list your house on the MLS without an agent.
Frequently Asked Questions
What percentage do Realtors make?
Realtors typically earn commissions ranging from 3% to 6% of the property's selling price. For instance, on a $400,000 home sale, the total commission could amount to $12,000 - $24,000.
Do Realtors receive a base salary?
The average real estate agent salary in the United States is $46,014 as of 2024. While some real estate agents may receive a monthly salary along with possible commissions as per their contracts. The majority work on a commission-only basis.
How are commissions split among real estate agents and brokers?
The total commission split is usually equal between the listing broker and the buyer's broker. It is then further divided between their respective brokers and agents.
Can I list my house without a Realtor and save commnission?
Yes! You can surely list your house yourself on the MLS. Listing services like Houzeo assign the paperwork and get your house listed on the MLS within 24 hours. And you can save 3% listing agent's commission.
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