How Much Do Real Estate Agents Make Per Sale?

How commission fees work | Dual agency and rates | If the sale falls through | FAQs

Most real estate agents only make money when they help a client buy or sell a home. This money comes in the form of a commission, or a small percentage of the home’s total sale price.

Agents typically make around 1.5% of the home’s sale price after closing. However, the exact amount of money an agent will earn per sale depends on several factors, including:

The location of the property

While the amount of money an agent makes is directly correlated to the sale price of the home, the sale price and location have to be considered together to fully understand how they impact an agent’s pay. 

California, for instance, generally has more valuable real estate than Alabama. So, although agents in California have a lower average total commission of 4.92% than Alabama’s 5.61%, California agents tend to earn more money overall because sales prices are higher on average. An agent in California earns $10,062 per sale compared to just $4,923 in Alabama.

These are an agent’s average earnings per sale by state. 

*Dollar values are rounded to the nearest hundred.

An agent’s level of experience

The average total commission rate is between 5–6% of the sale price. This amount is then split four ways among the listing agent, buyer’s agent, and each agents’ broker.

A 50–50 split model is common, but more experienced agents can negotiate their commission with their broker to earn a bigger slice of the pie, such as a 70–30 split.

That’s an extra $2,400 in the pocket of an experienced agent who negotiates a 70-30 split.

However, there’s no clear pathway to that split for an agent. Commission agreements vary depending on the relationship between each agent and their broker.

How much an agent’s willing to negotiate with clients

Like most aspects of real estate, commission rates are negotiable. Agents may be happy to negotiate their rates depending on the state of the market, how quickly the house is expected to sell, and other factors.

If a seller is listing a home in a hot seller’s market, for example, the house is likely to close quickly without requiring a lot of time or assistance from the agent. So an agent may be willing to work for a smaller commission.

How commission fees work

Real estate agents and their brokers earn a percentage of the sale price when  a client buys or sells a home. The average commission rate is between 5–6% of the sale price.

In most cases, your agent doesn’t get to keep the full commission all to themselves. The fee is divided four ways amongst the listing agent, buyer’s agent, and each agents’ broker. 

So, if the commission rate on a home is 6% and is split equally, each person would earn just 1.5% of the total commission fee.

For example, a 6% commission on a $400,000 property equals $24,000. This amount gets divided equally between both brokers, who each pay their agents their share. 

If all parties agree to a 50–50 split commission model, each broker and agent walks away from the sale with $6,000.

Are commission rates negotiable?

No law states that the commission must be a certain percentage. The 5–6% rate is simply the national average. Therefore, agents may be willing to accept lower commission rates depending on market conditions and the state of the property.

Local market conditions

In a seller’s market, sellers can receive several competing offers soon after listing their house for sale. This is because the number of buyers far exceeds available homes. 

A listing agent may happily agree to a reduced commission in a hot seller’s market since they won’t have to invest a lot of time into marketing the property. 

Property upkeep

A home that has been well cared for and updated will usually be easiest for an agent to sell. For example, a recently renovated home equipped with new appliances will be more likely to attract buyers than an outdated property in need of serious upgrades. 

Commission rates can vary depending on how difficult the agent believes it will be to find a willing buyer.

Get a pre-negotiated commission rate

Usually, sellers need to be careful when negotiating with their agent. They have to avoid negotiating commission rates so low that their agent’s financial motivation and service deteriorates as a result.

To avoid this situation, our friends at Clever Real Estate can help! Clever is a simple way to get pre-negotiated low commission rates with the best agents in your area at no cost to you.

Who pays the commission fee?

In most cases, the seller pays for the buyer’s agent and their own listing agent out of the sale proceeds.

If several offers are on the table, a buyer may offer to pay the commission or split the cost with the seller to sweeten their bid. 

How dual agency impacts commission rates

If the same real estate agent represents both the buyer and the seller in a transaction, it’s referred to as dual agency. An agent in this situation usually earns 50% of the commission, as opposed to the typical 25% when the commission needs to be divided four ways.

For example, a 6% commission on a $400,000 home is $24,000. Usually, this commission is split four ways: between two agents and two brokers. Each individual earns $6,000.

However, if an agent works for the buyer AND the seller, they’d collect commission for both agent roles. This would leave the agent with a total of $12,000.

Dual agency raises some ethical concerns, and it’s actually illegal in eight states:

• Alaska
• Colorado
• Florida
• Kansas
• Maryland
• Texas
• Vermont
• Wyoming

What happens if a sale falls through?

Even though agents are usually paid at the completion of sale, clients might still be on the hook for paying real estate commissions if they:

• Change their mind about selling
• Fail to correct any issues with their title, such as public record errors, unclear property lines, or mortgage liens
• Can’t let the buyer move in within a reasonable timeframe (about 30 days) after closing
• Commit fraud related to the home sale
• Insist on terms that weren’t included in the listing agreement
• Agree with the buyer to cancel the transaction

To protect their interests and avoid losing money, listing agents ask sellers to sign a listing agreement that outlines how long the contract will last and what fees the seller will be responsible for if they break the agreement.

Agents need this protection because they’re responsible for paying several things out of their own pocket up front, such as: 

• State/local real estate board fees
• Marketing costs
• MLS listing fees
• Business expenses (gas, phone, internet, office space, supplies, client meetings, closing gifts, etc.)

» MORE: What Is a Listing Agreement?

Desk fees

Real estate agents might also be required to pay their broker a desk fee in exchange for office space and a desk. The amount varies, but it’s often a flat rate the agent and broker agree upon in addition to or in place of a commission split. 

As another type of business expense, a desk fee can reduce the agent’s total take-home earnings.

FAQs

Related reading

How Much Do Real Estate Agents Make?: Wondering if a career in real estate is right for you? Check out this post to learn about the average income rates for agents across the U.S.

What Companies Offer the Lowest Real Estate Commission Fees?: Working with a low commission agent is one of the easiest ways to save money when you sell your house. This article can help you find the best agency for your needs!