Real estate agents earn income through commissions, which are a percentage of the home's sale price. Understanding how these commissions work can help buyers and sellers navigate costs during a transaction.

Average Real Estate Agent Commission

• Typical Range: 5% to 6% of the home sale price.
• Example: On a $350,000 home, this translates to $17,500–$21,000 in total commissions.

How Do Real Estate Agents Get Paid?

• Split Structure: Commissions are divided among:
• Listing Agent: Represents the seller.
• Listing Broker: Oversees the listing agent.
• Buyer’s Agent: Represents the buyer.
• Buyer’s Broker: Oversees the buyer’s agent.
• Example Split (6% Total):
• 1.5% each to the listing agent, listing broker, buyer’s agent, and buyer’s broker.
• Broker Role: Real estate brokers are agents with additional qualifications, often running brokerages or managing agents.

Who Pays the Real Estate Commission?

• Typically Paid by the Seller:
• The commission is deducted from the seller’s proceeds at closing.
• Sellers often factor commission costs into the home price, indirectly affecting buyers.
• Legal Challenges:
• Recent lawsuits claim the practice inflates seller costs.
• In 2023, a jury ruled in favor of plaintiffs in a class-action lawsuit, and settlements in 2024 could potentially alter how commissions are structured.

Alternatives to Traditional Commission

• Discount Real Estate Brokers
• Offer lower commission rates or flat fees.
• Examples: Redfin, Clever Real Estate, Houwzer.

• Services and rates vary by company, so compare options.

• For Sale By Owner (FSBO)

• Selling without a listing agent can save on commissions.
• Requires handling marketing, negotiations, and legalities independently.
• Best suited for sellers with time, resources, and knowledge of real estate.

Summing it up

• Sellers: Typically cover agent commissions but may pass costs to buyers through home pricing.
• Buyers: Don’t directly pay commissions but are indirectly impacted by seller pricing strategies.
• Exploration: Discount brokers and FSBO options can reduce costs, though they may require additional effort.

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