Buying or selling a home is often one of the largest financial transactions most
people will make in their lifetime. As such, it’s important to understand how real
estate agents on both sides of the transaction get paid and where those fees come
Real estate agents are paid based on commission, much like other professional
services. But unlike attorneys or accountants, real estate agents don’t typically
charge by the hour. Instead, they get paid a percentage of the money exchanged at
the closing table. That percentage is typically negotiated upfront as part of the
agent’s initial contract with a seller. Once the sale is completed, the agent’s
brokerage will send them a check for the commission amount.
While that check may seem like a lot of money, it’s rarely the full commission an
agent will keep. Because agents are independent contractors, they’ll need to pay
taxes on their commission payments. On top of that, the broker will take out a desk
fee to cover their sponsorship of the agent’s business. That means if an agent sells a
property for $2,000,000, they’ll only receive around $125,000 to keep after all the
expenses are taken out.
For many residential sales, the standard commission rate is 6%. However, the reality
is that real estate agents don’t get to keep the whole 6%. In addition to their own
brokerage fees, they also have to split the buyer’s agent commission with their cobroker.
That means if an agent sells your million-dollar Manhattan condo for
$500,000, they’ll only be taking home $3000.
That’s why it’s so important to shop around and interview multiple real estate agents
before hiring one. Find an agent who you trust and who has a solid track record of
success. If you’re willing to pay a premium for an agent with a proven track record,
it can often be worth it in terms of the higher commission rates they’ll be able to
command. Also read https://www.prestigehomebuyers.co/
In some cases, sellers will offer to pay the buyer’s agent commission as a way of
sweetening an offer and drawing in more buyers. This is often the case for
properties that are in a seller’s market where there are more homes available than
As you can see, real estate commissions can get quite complicated. The best way to
know how much a real estate agent will be earning is to talk to them about their
commission structure during the agent interview process. While it isn’t always
possible to negotiate a lower fee, the agent interview will give you a sense of what is
typical in your market. If you’re looking for a more traditional employment
arrangement, many of New York City’s top real estate firms offer salaried positions
with little to no commission. However, these opportunities are usually reserved for
the most experienced and top-producing agents.