How Much Do Real Estate Agents Make On A Home Sale?

Understanding commission structures

Before the NAR settlement changes, the national average real estate agent commission typically hovered around 5.8% of the sale price of a home. This seller-paid commission was usually split about 50/50 between the listing agent and the buyer’s agent. Both agents would then split their portions with their brokers.

With the NAR settlement in place, there is not yet enough data to calculate a new average agent commission percentage, but anecdotally, sellers and buyers are likely paying their own agents about 2.8%-3% of the home’s sale price. It should be noted that some sellers may still offer to cover the buyer’s agent fees to attract buyers in slower markets.

Let’s look at examples of both the traditional and the new commission structures.

• Traditional agent commission model: Let’s say your home value is consistent with the current nationwide average of $416,700. With the standard 5.8% commission, that comes to $24,169. Of that, half — $12,084 — goes to your agent, and the other half goes to the buyer’s agent.
• New agent commission model: Under the new NAR model, on the sale of a $416,700 home, the seller might pay 2.9% of the home’s price to their agent, or about $12,084. The buyer would pay whatever percentage they negotiated with their agent, which might also be around 2.9%.

Both agents still have to divvy up their portion with their brokers, and the percentage they owe will vary based on the agent’s experience level — typically ranging from less than half to two-thirds. Assuming a moderate amount of experience, they’re probably looking at another 50/50 split, bringing the agent’s take-home pay to around $6,042.

Commission examples based on a home’s selling price

Factors affecting an agent’s income

When considering how much real estate agents make, there are a few key variables that come into play.

Location market conditions

An agent’s local market conditions can significantly influence their income. In areas with high property values and strong demand, agents may earn higher commissions on each transaction. In less active markets, the number of potential sales may be lower, leading to less overall income.

Experience

Experience and specialization can also play a major role in an agent’s earnings. As agents gain more experience and develop expertise in certain niches, such as luxury homes or relocation, they may command higher commissions and fees.

Sales volume and transaction frequency

Busy agents who successfully close multiple deals each month will naturally earn more than those with sporadic sales.

Brokerage fees

The brokerage fees and splits that an agent agrees to with their sponsoring broker can have a significant impact on their take-home pay. Some agents work under more favorable split arrangements with their brokerage, allowing them to retain a larger portion of their commission earnings, while others might agree to higher fees in exchange for more support and resources from their broker. A buyer’s agent may also negotiate with their client for a more favorable commission.

Real estate agent expenses

Real estate agents, like any business owners, have to consider the costs of doing business as they evaluate their potential earnings.

One of the most significant expenses agents face is marketing and advertising costs. These can include everything from creating a professional website and hosting open houses to running ads on social media platforms and mailing out postcards to potential clients. Depending on their target market and level of ambition, agents can spend hundreds or even thousands of dollars per month on marketing activities.

Agents must also cover the costs of their own licensing, education, and continuous training to stay up-to-date on the latest industry trends and legal regulations.

They often have to pay membership fees to join the Multiple Listing Service (MLS) and local real estate boards, which grant them access to property listings and other crucial resources.

MLS note: Previously, real estate agents could include offers of compensation on the MLS. However, under the new rules established by NAR’s $418 million settlement, such offers are now prohibited on the platform.

Operational costs, such as renting office space, maintaining a car for transportation, and investing in technology (i.e., smartphones, tablets, and software), can also eat into an agent’s earnings.

Balancing these expenses against their commission income is necessary for agents to ensure profitability in their business.

The value of real estate agent commissions

When you pay real estate commissions, you’re paying for the professional experience and services agents provide throughout the home sale process.

“What a lot of people don’t understand is the complexity of the real estate transaction,” Derek Whitner, a top-selling agent in the Atlanta area, says. “There are so many different parties that have their hands in the basket — from the closing attorney (if necessary) and inspector to the buyer and seller to the title company and lender. You have to juggle all of the parties involved with the transaction and make sure everyone gets what they need.”

When you sell your home with an agent, they handle that juggling for you. Your commission pays for the expertise and logistical coordination that will likely boost your bottom line.

“I try to make sure my sellers are aware of the value we add, from negotiating the details, getting through due diligence, making sure that the title company is doing their job, and that we’re closing on time,” Whitner says. “We’re getting our seller from point A to point B. We’re getting them to the finish line and getting the most money in their pocket in the shortest amount of time.”

Naturally, you can expect to sell your home faster and for more money when you work with a top-performing agent in your area with a proven track record of driving results. HomeLight can connect you with an agent in your market who is the best fit for your selling needs.