How Real Estate Agents Get Paid Through Commission Splits-
Real estate agents play a crucial role in helping buyers find their dream homes and sellers close deals at the best possible prices. But many people wonder: How do real estate agents get paid? Do they receive a salary ( commissions ), hourly wage, or a commission only after a deal closes?
The short answer is that most real estate agents earn money through commissions, which are based on a percentage of the property’s final sale price. However, the details can vary depending on the market, location, brokerage agreements, and whether the agent is working with the buyer or the seller.
In this article, we’ll break down the real estate agent payment structure, explain the process of commissions sharing, and answer the most common questions about how real estate professionals earn their income.
1. Do Real Estate Agents Get Paid a Salary?
Unlike many traditional jobs, real estate agents usually do not earn a fixed salary. Instead, they work as independent contractors affiliated with a brokerage. This means their income depends entirely on their performance and the number of successful deals they close.
Some brokerages may offer small base salaries, stipends, or retainers, but these are exceptions rather than the rule. For most agents, no sale means no income.
2. How the Commissions System Works
The most common way agents are compensated is through a commission-based system. This commission is a percentage of the property’s selling price, and it is agreed upon in the listing agreement between the seller and the listing broker.
Example:
- If a home sells for $300,000 with a 5% commissions, the total commission is $15,000.
- That commission is typically split between the buyer’s agent and the seller’s agent, often 50/50.
- Each agent then gives a percentage of their share to their brokerage.
So in this example:
- Listing agent earns $7,500 before brokerage split.
- Buyer’s agent earns $7,500 before brokerage split.
- After brokerage fees (which can range from 20%–40%), the agent takes home less.
3. Who Actually Pays the Agent?
One of the biggest misconceptions is that buyers directly pay their agents. In reality, the commission is almost always paid by the seller, out of the proceeds from the home sale.
Here’s the breakdown:
- Seller signs a listing agreement with the listing agent.
- The seller agrees to pay a commission (commonly 5%–6%).
- When the home sells, the listing broker pays the buyer’s broker a portion of that commission.
- Each broker then splits the commission with their respective agents.
This way, the buyer’s agent is compensated without the buyer having to pay them directly.
4. Commission Split Between Broker and Agent
Every real estate agent must work under a licensed brokerage. The brokerage provides office space, marketing resources, legal support, and compliance oversight. In return, they take a share of the commission.
Typical commission splits can be:
- 50/50 split (new agents often start here).
- 70/30 split (experienced agents).
- 100% commission model (agent pays a flat fee to the brokerage but keeps all commission).
For example:
If an agent earns $7,500 commission and works under a 70/30 split, they keep $5,250 while the brokerage takes $2,250.
5. How Buyer’s Agents Get Paid Commissions
Buyer’s agents represent the buyer in the transaction. While the seller technically pays the commission, part of it is allocated to the buyer’s agent.
This motivates buyer’s agents to:
- Search for the best property deals.
- Negotiate favorable terms for their clients.
- Ensure smooth closing processes.
In some cases, buyers may agree to pay their agent directly if the seller refuses to offer a commission. However, this is rare in most markets.
6. How Seller’s Agents (Listing Agents) Get Paid or Commissions
The listing agent represents the seller and is responsible for:
- Marketing the property.
- Hosting open houses.
- Negotiating offers.
- Coordinating inspections and closing.
Their commission comes directly from the total commission fee agreed upon in the listing contract. They often earn slightly more than buyer’s agents if they can negotiate favorable commission percentages.
7. Flat Fees and Alternative Payment Models
Although commissions dominate the industry, alternative models are gaining popularity.
Some of these include:
- Flat Fee Listing: A seller pays a flat upfront fee to list their property instead of a percentage-based commission.
- Discount Brokerages: Offer reduced commission rates (e.g., 1%–2%) in exchange for fewer services.
- Hourly or Salary Agents: Rare, but some agents work on a salary basis, especially in corporate relocation services.
These models may save sellers money, but they can also limit the level of service provided.
8. Do Real Estate Agents Get Paid if a Sale Falls Through?
No. Real estate agents only get paid when a deal closes.
If a buyer backs out, financing fails, or the seller changes their mind before closing, the agent earns nothing despite investing time, marketing costs, and effort.
This is why agents are highly motivated to ensure every deal progresses smoothly to closing.
9. Factors That Affect an Agent’s Income
A real estate agent’s annual earnings can vary dramatically depending on:
- Location/Market: High-value markets like New York or Los Angeles mean bigger commissions.
- Experience Level: New agents may struggle, while experienced agents build strong referral networks.
- Brokerage Split: A higher commission split means more take-home pay.
- Number of Transactions: Agents handling more sales naturally earn more.
- Specialization: Luxury real estate agents earn higher commissions due to larger property values.
10. Average Real Estate Agent Earnings Commissions
According to data from the National Association of Realtors (NAR):
- The median annual income for real estate agents in the U.S. is around $50,000–$60,000.
- Top-performing agents, especially those in luxury or commercial real estate, can earn six to seven figures annually.
- New agents often earn much less until they establish themselves.
11. Are Real Estate Commissions Negotiable?
Yes, commissions are negotiable. While the standard range is 5%–6%, some agents may agree to lower rates to secure a client, especially in competitive markets.
However, reducing commissions may impact how much effort an agent invests in marketing and negotiating.
12. Common Myths About How Agents Get Paid
Myth 1: Buyers pay their agents directly.
Reality: The seller typically pays both agents.
Myth 2: Agents keep the entire commission.
Reality: Agents split their commission with their brokerage and sometimes team members.
Myth 3: Agents get paid just for showing houses.
Reality: They only get paid when a deal closes.
13. Why Commissions Are Worth It
Some sellers hesitate about paying commissions, but it’s important to remember the value agents bring:
- Market expertise.
- Do Real Estate Agents Get Paid a Salary or Only Commission.
- Professional negotiation skills.
- Marketing and staging services.
- Legal and paperwork support.
- Faster and higher-value sales.
Studies consistently show that sellers who work with professional agents often net more money even after paying commissions.
14. Final Thoughts-
So, how do real estate agents get paid?
In most cases, they earn a commission based on the home’s sale price. That commission is split between the buyer’s agent and the seller’s agent, and each shares a portion with their brokerage. While some alternative payment models exist, commission-based compensation remains the standard.
For buyers and sellers, understanding this system is important because it helps clarify who pays whom, when, and how much. It also highlights why agents are so motivated to close deals — their livelihood depends on it.
Whether you’re buying, selling, or considering a career in real estate, knowing how agents get paid provides transparency in one of the largest financial transactions you’ll ever experience.