Tag: real estate agents

How Do Real Estate Agents Get Paid?

For many years, selling a home followed a common pattern. When a seller sells their house, they usually pay a commission of around 5% to 6% of the sale price to their real estate agent. That commission was then shared between the seller’s agent and the buyer’s agent. Even though both agents were involved, the seller paid the full amount, and the buyer did not pay their agent directly.

However, this system changed in 2024 due to new rules introduced after a legal settlement between the U.S. Department of Justice together with the National Association of Realtors. These changes were made to bring more transparency and fairness to the real estate market, especially for buyers who are now learning how to calculate realtor commission more carefully before hiring an agent. Under the new rules, sellers are no longer allowed to pay the buyer’s agent. Instead, buyers must now negotiate and pay their own agents directly.

Over time, experts believe these changes may lower overall commission costs, saving money for both buyers and sellers. Below is a clear explanation of how real estate agents earn money and how the new rules affect everyone involved.

Key Points to Know

Real estate agents earn most of their income through commissions, which are usually a percentage of the home’s sale price.

Under the new rules, buyer’s agents cannot receive part of the seller’s agent commission.

Buyers must sign a written agreement with their agent before viewing any homes.

In the long run, experts believe real estate commissions could drop by up to 50% due to better competition and transparency.

Commission-Based Pay

Most real estate agents earn money through commissions. This means they get paid only when a property is sold, and their income depends on the sale price.

In 2024, the median annual income for real estate sales agents was approximately $56,320, while real estate brokers earned a median annual income of $72,280. Income can vary significantly based on experience, location, and the number of deals an agent closes.

Earlier, commissions for both the seller’s agent and the buyer’s agent were combined and paid by the seller. After the 2024 settlement, this practice is no longer allowed. Sellers can only pay their own agents, while buyers must handle their agents’ fees separately.

How Commissions Are Split

In most states, real estate agents must work under a licensed broker. The broker manages the business side of real estate and takes a share of the commission earned by the agent.

The way commissions are split depends on the agreement between the agent and the broker. Some brokers take a large percentage, while others allow agents to keep more, especially if the agent is experienced or brings in many clients. A skilled agent with strong connections and a good reputation can usually negotiate a better split.

Sometimes, an agent may also share their commission with another agent if they work together on a deal. This further reduces the final amount the agent takes home.

Why Commission Rates Vary

There is no standard commission rate in real estate, as the amount can change based on several factors, such as:

  • The agent’s experience and negotiation skills
  • The broker’s fee structure
  • Market conditions
  • Property value and location
  • Supply and demand

In a seller’s market, where there are more buyers than homes, agents often have more power to charge higher commissions. In a buyer’s market, where there are more homes than buyers, agents may reduce their fees to stay competitive.

Competition also matters. In crowded markets, newer or lesser-known agents may lower their rates to attract clients. Property type and location can also influence how much commission is charged.

Other Ways Agents Get Paid

Although commissions are the most common payment method, some agents use alternative models.

Flat-Fee Services

Some agents charge a set fee rather than a percentage of the property price. This could be a single upfront payment or a menu-style system where clients pay separately for services like listing a home, showing properties, or handling paperwork.

Flat fees are transparent, but they must often be paid up front. In some cases, they may cost more than a commission, or they may offer fewer services, especially when compared to how traditional real estate agents are typically compensated through performance-based commission structures.

Hourly Rates and Salaries

In rare cases, agents charge by the hour. Some companies also hire agents as employees and pay them a salary. For example, Redfin pays its agents a base salary plus bonuses for completed sales.

Referral Fees

Agents may also earn money by referring clients to lenders, movers, or relocation services. If a referral leads to business, the agent may receive a fee.

The NAR Lawsuit and Why It Happened

In 2024, the National Association of Realtors agreed to pay $418 million and change its rules after a lawsuit claimed that commissions were being unfairly inflated. Homeowners argued that sellers were forced to pay high commissions and that buyers had little information or power to negotiate.

According to the DOJ, many real estate listing platforms hid commission details from buyers. This made it easier for buyer agents to guide clients toward properties that paid higher commissions, rather than focusing on what was best for the buyer. Because buyers were unaware of these fees, they could not negotiate lower rates.

New Rules from the Settlement

As part of the settlement, several major changes were introduced:

  • Listing agents can no longer show commission offers on Multiple Listing Services (MLS).
  • Buyers must sign a representation agreement before touring homes.
  • Buyer agents are strictly forbidden from receiving any payment from the seller or the seller’s agent.

These rules are meant to make costs clearer and encourage honest negotiation.

Who Pays the Commission Now?

Under the new system:

  • Sellers pay only their listing agents.
  • Buyers pay their own agents directly.

Experts believe this change could reduce overall commission costs in the long run. Sellers may lower home prices slightly since they no longer need to cover buyer agent fees. However, buyers now face an extra cost, which could be difficult for first-time buyers who already struggle with down payments.

How real estate agents can prepare for the coronavirus

In many countries the Health Authorities held public meetings to give information about the new coronavirus as well as informing about the ongoing preparations. This is a good thing to be prepared and informed as this puts everybody at ease. There is nothing worse than public panic, when everybody runs to the shop leaving empty shelves. This can create even bigger problems.

Of course, this is not just job of the authorities, there is something everybody can do. First, stay calm and objective.

How can each of us be prepared you may wonder.

Especially if you have a real estate agency you may have to think about what actions to take. As seen in Italy maybe it is possible for some workers to do their tasks from home. Always remember, better safe than sorry. You can make sure that all of them have the necessary tools to be able to do that. Maybe a business cell phone and laptop that they can bring home, just in case.

You should start thinking about special preparation for your team, some may have to stay with their kids if schools or kindergartens close.

Avoid trips to coronavirus infected areas

Also, avoiding trips to places where the virus has spread should be carefully reconsidered. Maybe a possible buyer likes to view a house in such place. It might be better to postpone in that case. For example, you could show a virtual viewing of the house instead. You can then travel later when it is safe again.

Regardless of being a real estate agent or not …

This is the most important everybody should do: wash your hands as often as possible. Everybody should have a good cough etiquette, disinfecting surfaces that might be contaminated, keeping distance to somebody who seems sick and don’t go out if you feel ill. Those are very simple but effective things. Of course, we all know them, but as we sometimes forget it’s always good to be reminded especially now with the new coronavirus.

Stay healthy. 🙂



Real Estate Agents are still valued & in high demand

Certainly, nice to hear for every real estate agent, we just love them. Most of us can´t do without them. This is the conclusion of a survey recently carried out in Germany by INNOFACT AG (a market research institute).

We value their professionalism and expertise

The survey shows that most of private owners would rather hire a broker to sell their property than to market it themselves.

Almost 69 percent of them would hire a real estate agent even if they had to pay the fees themselves.

When searching for the right agent, they found, Internet research is ranked first. Naturally, a high revenue in the sale is priority for sellers during a quick and straightforward sales process.

57 percent of respondents said they want to ask a real estate agent to handle the sale. 36 percent want to try the real estate sale on their own. That applies with 44 per cent especially for the young age group from 18 to 39 years. 69 percent of those who want to hire a broker would do so even if they had to pay parts or 100 percent of the commission themselves.

“What if the property in question is far away?” they asked

The answers of those who would rather sell their real estate themselves are even more striking in this case. Suggesting a travel time of around one hour or more, 96 percent say that they would hire a real estate agent in this case. Even under the assumption that they would pay his fees, 84 percent say that they want to work with a broker.

Not a surprise

Answering about the order of the most important aspects in the property sale, owners answer:

1: As high as possible

2: As fast as possible the sale

3: As little effort as possible

So, to all real estate agents: we love you – keep up the good work.

To give an extra help for agents, try our partner website to list your real estate deals: https://www.all-real-estate.com/

The study: Online survey of INNOFACT AG on behalf of ImmobilienScout24 among 500 private property owners throughout Germany, who plan a real estate sales within the next three years. Survey period: July 2019.

Are real estate agents paid on commission only?

The answer is: It depends.

If real estate agents are paid on commission only depends if the real estate agent is self-employed or not. If not, he would get a monthly wage from his employer plus his share in a deal when he sold something.

Being employed

Any real estate agent who does not own a business is usually an employee at a bank or at a real estate office.

This can be lucrative. Although in this case the commission is not particularly large, he receives a fixed salary each month.

The commission varies greatly with the performance of the broker. In most real estate offices the performance-related salary would be between 20 to 50 percent of the commission.

Being self-employed

An alternative to an employment with a monthly salary is being self-employment as a real estate agent.

There is no fixed income, but the commission per sale or rental is higher.

Real estate commissions are based on the price of the property. The commission for a real estate transaction is negotiable. It tends to range anywhere from 1% all the way up to 10%.

But don´t forget, as a freelance real estate agent you also have more expenses, such as costs forrunning your office and possibly paying staff. These costs will lessen your profits. In addition, self-employed need to look after their health insurance and Pay taxes (income tax, trade tax, etc.).

Real estate agents carry a high economic risk, because they are responsible for the accuracy of their statements. Basically, they work for free until they sell something. Some properties may not be sold because of unrealistic price expectations of the seller. Also, some may sell only after many months and countless viewing appointments. In addition, buyers who contact the seller directly to bypass the commission pose a commercial risk to the real estate agent.