How do Realtors get paid?

Young couple touring a home with their realtorImage: Young couple touring a home with their realtor

In a Nutshell

How do Realtors get paid? Often, both home sellers and homebuyers are represented by agents, but the seller is typically responsible for covering agent commission costs. These may be a percentage of the sale, a flat-fee or another negotiated amount.
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Real estate professionals get paid to help buyers and sellers complete the sale of a property.

Usually, the seller pays these fees. The total is typically a percentage of the sale, a flat-fee or another negotiated sum that gets split evenly between the buyer’s and seller’s agents.

Let’s take closer look how Realtors get paid, how much they get from a sale, and the services they provide.



What are Realtors?

Realtors are simply real estate professionals — agents or brokers — who have registered with the National Association of Realtors. NAR is a professional organization that imposes educational requirements and a code of ethics on its members.

Buyers and sellers can work with Realtors or non-Realtor agents and brokers, and should receive similar services from them, since they all must comply with minimum service provisions set by state laws.

All can help sellers with marketing properties, finding potential buyers and arranging showings — and can help buyers find and learn about properties to potentially purchase. They also may review contracts, negotiate offers and assist with closing transactions.

FAST FACT

Real estate broker vs. agent: What’s the difference?

Real estate brokers are typically licensed not just to complete property sales but also to manage a business, such as a real estate agency.

Real estate agents are licensed to help buyers and sellers with real estate transactions but may be required to work with a licensed broker on completing certain aspects of a transaction.

How much are Realtors’ fees and how do they work?

In traditional real estate transactions, the seller will typically pay a commission equaling 5% to 6% of the purchase price of the home — with the total usually split evenly between the buyer’s agents and the seller’s agents.

Brokers and agents on both sides typically have customary fees, though sellers are free to negotiate.

When a seller enters into a listing agreement with an agent, the agreement may state a specific period of time the agreement will be in effect. If a seller backs out of the agreement before the end of that time period without approval, the seller may still have to pay the agent’s commission.

Buyers’ and sellers’ agents may be allowed to offer a rebate equaling part of their commission. But state laws may impose restrictions on when and how the rebate is advertised and paid.

How else can real estate agents be paid?

Fee-for-service arrangements are an alternative to full-service brokerage firms. Instead of paying a set commission for a bundle of services, real estate professionals working under a fee-for-service arrangement can charge for specific things.

In a fee-for-service arrangement, brokers or agents could charge separately for services like listing the home on the Multiple Listing Service (or MLS), negotiating the purchase agreement or advising on pricing.

This could save sellers money since they can choose only to pay for services they need, paying an hourly or a flat fee for each service.

What services do real estate agents provide?

Traditionally, full-service real estate brokers or agents have provided a variety of services in exchange for a commission.

Here are some of the services generally included in this fee.

  • Marketing a property, including listing it on the local MLS
  • Reviewing purchase and sales agreements
  • Negotiating the terms of the sale on behalf of their clients
  • Arranging for potential buyers to visit properties
  • Providing potential buyers with property information
  • Helping buyers to understand financing options
  • Assisting with handling paperwork required to close the transaction

Do real estate agents get paid if there’s no sale?

Sellers are typically not required to pay a commission if the property doesn’t sell. But, again, if they back out of a listing agreement early without the agent releasing them, they may be obligated to pay the original seller’s agent commission — assuming the sale happens during the time agreement should have been in effect.

Buyers who do not enter a contract to buy a home generally don’t have to pay anything to their agent, unless they signed an agreement specifying otherwise.


Next steps

Finding the right real estate professional can make buying or selling a home easier. And you may find the commission fees to be well worth it for the assistance you get.

Learn how to find a good real estate agent so that you can work with a professional that will offer the support you need, whether you’re buying or selling your home.


About the author: Christy Rakoczy Bieber is a full-time personal finance and legal writer. She is a graduate of UCLA School of Law and the University of Rochester. Christy was previously a college teacher with experience writing textbo… Read more.