How to Pay the Real Estate Agent Commission

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

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.

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