How Do Real Estate Agents Get Paid?

If you're considering a career in real estate, you may wonder how real estate agents get paid. Rather than earning an hourly rate or set salary, you'll receive a commission, which is a percentage of the final sale. This commission-based structure offers exciting earning potential, rewarding your hard work and dedication with the possibility of limitless income. 

Learn more about real estate agent commission, and explore how much you can expect to make as an agent, including factors that may affect your income.   

Read more: What Is a Real Estate Agent? Your Career Guide

Understanding commission: How do real estate agents get paid?

Unlike salaried employees, who receive a set amount of pay each month, real estate agents receive a commission on each sale they make. This is true for agents representing buyers, sellers, or both parties. 

Read more: Is Real Estate a Good Career?

1. How much is real estate commission?

Real estate commissions on residential sales usually average between 5 and 6 percent of the sale price. The listing and buying agents typically split that amount evenly unless all parties agree to alternative terms ahead of the purchase. Agents sometimes charge up to 10 percent for a land sale due to the extra effort involved in marketing and selling vacant land. 

Commission on commercial real estate under $1 million usually averages from 4 to 8 percent, with higher percentages going to lower sale prices. Agents selling commercial properties over $1 million might only charge from 1 to 3 percent in commission due to the large sale price (and subsequent commission amount). Some commercial real estate agents may charge a flat fee rather than a percentage. 

2. Who pays the real estate agent's commission?

Traditionally, the property seller paid the commission on the sale, but a lawsuit settlement by the National Association of Realtors changed this practice in August 2024. According to the terms of the lawsuit, buyers now must pay their agent. Sellers still have the option to offer some compensation to the buyer's agent if they follow the new disclosure rules.

3. How are real estate commissions shared?

As a real estate agent, you share your commission with your broker. The broker is the licensed real estate professional who oversees the agents working at the brokerage. Exactly how much you receive depends on your agreement with the brokerage. Most agents have a fixed commission, which means they receive a set percentage of each commission. However, your broker may offer a graduated split, which lets you earn a higher commission as your sales increase.

Real estate commission example

To better understand real estate commissions, consider the following example. Imagine you are the listing agent for a home selling for $450,000, and you receive a 3 percent commission. You and your broker will split the $13,500 (3 percent of $450,000) according to your agreed split. 

With a 70-30 distribution, you would receive $9,450, and your broker would receive $4,050. Your share is $8,100; your broker receives $5,400 with a 60-40 distribution. Under a 50-50 distribution, you and your broker each receive $6,750.

Do real estate agents get paid if they don't sell?

Generally, real estate agents only receive a commission when a sale closes. However, you can write a provision into a contract stipulating your client must pay a commission regardless of whether a property sells. In addition, a seller may also have to pay you a commission if a sale doesn't go through under certain conditions:

• The seller changes their mind after accepting an offer. 

• The seller changes the contract’s terms after signing.

• Uncorrected title-related issues emerge. 

• The seller's spouse won't sign the property deed. 

• The seller commits fraud in connection with the sale of the property.

• The seller and buyer mutually agree to cancel the sale. 

Real estate agent average annual income 

According to Glassdoor, the estimated total pay for real estate agents in the US is $238,948 per year. This figure includes an average base salary of $148,137 and $90,811 in additional pay. Additional pay may represent profit-sharing, commissions, or bonuses. [1]. This number might vary up or down according to your specific circumstances, including how much you work and your local market conditions.

The following are some factors that influence your earnings:

1. Amount of time worked

Real estate agents often have the luxury of working part-time or full-time. Typically, the more hours you work as a real estate agent, the more income you're likely to earn.  

2. Marketing expenses

As a real estate agent, you'll likely have to spend money marketing your listings. How much you spend on marketing activities like creating content, lead generation, email marketing, social media ads, and staging and showing properties can affect your net income. 

Read more: Marketing Strategy: What It Is and How to Create One

3. Brokerage

As mentioned, your broker’s commission distribution directly affects how much you make on each sale. Remember that you'll earn more with a 70-30 distribution (70 percent to you and 30 percent to your broker) than you will with a 50-50 distribution. 

4. Experience

As you gain experience, you will likely see repeat clients and referrals from past customers. This generally translates to more sales. When you have a broad and dependable client base, you'll also spend less on marketing activities like lead generation. 

5. Location

Where you live makes a difference in the commissions you receive for real estate sales because properties in some areas are higher than others. For instance, you would probably make a higher income selling apartments in Manhattan than you would if you sell homes in a small town in Texas. Factors that affect home prices in specific neighborhoods include the size of the homes and properties, crime rate, and inventory.    

6. Niche 

The type of real estate you sell also affects your annual income. If you specialize in commercial real estate instead of residential properties, chances are you'll make more money because commercial prices tend to sell for more money than residential homes.  

7. State of the economy

The state of the national economy can impact your income as a real estate agent. Consider the following factors:

• Interest rates: When interest rates are high, real estate sales slow down. When interest rates are low, real estate sales speed up. 

• Supply: When the supply of homes is high and demand is low, prices come down and vice versa.

• Prices of construction materials: When prices of construction materials go up, so do the prices of homes.

Next steps in real estate

Real estate agents earn commission rather than an hourly or annual salary, and numerous factors can affect how much you might make in this role. If you're ready to start your own real estate career, consider taking online courses on Coursera, like The Principles of Real Estate offered by Keller Williams. Another option, Successful Negotiation: Essential Strategies and Skills from the University of Michigan, offers you a chance to sharpen your negotiation and communication skills.