How Do Real Estate Agents Get Paid?

Whether you’re looking to become a homeowner or put your property up for sale, you'll probably work with a real estate agent at some point. They help buyers and sellers throughout the process and can facilitate a smoother real estate transaction.

Historically, real estate agents have been primarily compensated through commissions they received from home sales, but some recent changes have impacted how your buyer agent may receive compensation for their work.

Let’s look at how real estate agents get paid, who foots the bill, and important industry changes that may impact your home purchase price.

What is a Realtor® vs. Real Estate Agent?

Let’s begin by clarifying the difference between a real estate agent and a Realtor®, according to the National Association of Realtors (“NAR”):

• Real estate agents: These are real estate professionals licensed by the appropriate state regulator who facilitate transactions between buyers and sellers.
• Realtors: These are licensed real estate agents who are also members of NAR and agree to adhere to the organization’s standards and code of ethics.

No matter which type of professional you choose, both real estate agents and Realtors® can help with your home purchase. It’s important to note: While all Realtors® are real estate agents, not all real estate agents are accredited Realtors®.

Whether you’re buying a home or selling, you can enlist the help of a real estate agent to do much of the legwork. They help sellers determine the right listing price, vet potential buyers, and negotiate an acceptable home sale price. Buyers can partner with agents to find homes that meet their criteria, help them make an offer and negotiate on their behalf, and navigate the closing process.

How Do Real Estate Agents Get Paid?

The home seller has historically paid their Realtor® or real estate agent a percentage of the purchase price (typically around 5 or 6%) which in the past, has been split between the listing agent and the buyer’s agent (more on this in a bit). Commission rates can vary, but are not set by NAR or real estate brokerages. In other words, the agent can request any percentage they like. The home seller can accept, decline or negotiate.

How Do Realtor Commissions Work?

Seller’s agents list homes on multiple listing service (MLS) databases, which have historically included the commission split — or the portion of the seller’s agent’s commission that will go toward the buyer’s agent — but recent changes to the NAR rules no longer allow for this.

Historically, a 50/50 split was common. So if the seller’s agent was receiving a 6% commission from a home sale, they’d keep 3% (prior to any cut they owe to their brokerage company, if they work for one) and give the remaining 3% to the buyer’s agent.

However, it’s important to note some updated regulations that are now impacting the way buyer agents receive payment — a change that can also impact the purchase price of your future home.

2024 Changes to Commission Structures

NAR recently made some significant changes regarding Realtor commissions in response to multiple lawsuits. The new rules, which took effect in 2024, prohibit the listing agent from disclosing buyers’ commissions in MLS listings. Buyer’s agents are also required to obtain a signed listing agreement before working with a homebuyer. They’ll need to complete this before touring open houses.

These changes could impact the way buyer’s agents are paid — and their commission amounts. That’s because sellers’ agents can no longer advertise a flat compensation to buyers’ agents through the MLS. Going forward, they may negotiate compensation with the buyer, seller or both.

Time will tell how it all plays out, but you’ll want to pay attention to your agent’s fee structure if you’re buying or selling a home, as it may impact the cost of doing business.

Real Estate Agent’s Earnings: An Overview

A real estate agent’s earning power depends on things like:

• The average selling price in their local market
• The commission rate they receive on home sales
• How many deals they close
• Their commission split structure with buyer’s agents
• Whether or not they serve as a dual agent, which would allow them to collect the full commission
• Commission payouts from the agent to their broker firm/employer

With that said, the average annual salary for a real estate agent in the United States is just north of $94,000, according to career site Indeed. The real estate agent commission is typically paid out once a real estate transaction has been settled.

Again, the home seller has historically covered agent commission costs, but with the new rules, your contract with your buyer agent may determine how these fees shake out. A seller may shell out more if they’ve agreed to cover some of the buyer’s closing costs. Sellers sometimes make this concession to attract buyers.

The new rule changes put in place by NAR could potentially change the way buyer’s agents are compensated. For example, it’s possible that buyers will be asked to pay their agents directly. We’ll have to wait and see how things unfold, but that could add up to a significant expense, on top of saving for a down payment and closing costs.

Can a Real Estate Agent Receive a Buyer and Seller Commission?

A real estate agent can also be a dual agent who represents both the buyer and the seller. In this situation, they’d keep the total commission. However, dual agency can set the stage for conflicts of interest, so the agent must disclose this to all parties and receive their informed, written consent.

Agents can also be compensated in the following ways:

• Referral fees between real estate brokerages
• Flat fees charged for full services or a la carte services

Geographic Variations in Realtor Payments

It’s worth noting that commission rates can vary, depending on the state and region. You may assume that fees are highest in bigger, populous states like California, Texas or Florida, but data from Clever found this isn’t the case. Rates are 6% or higher in Wyoming, Kentucky, Mississippi and West Virginia. Hawaii had the lowest rate at 4.78%. Local home prices and market conditions can also affect average rates in a given area.

When Do Real Estate Agents Receive Their Earnings?

Once all the paperwork has been finalized and the sale has closed, the brokerage will complete an internal review process and disburse commission payments to the agent who orchestrated the deal. Only then do real estate agents get paid.

The time it takes a real estate agent to get paid can depend on:

• How long it take for funds to be disbursed from escrow (An escrow account is a holding place for money passing from buyer to seller during a real estate transaction.)
• The complexity of the transaction
• The brokerage’s review and verification policies
• Whether there are any issues with the paperwork
• How busy the brokerage is

Conclusion

Paying real estate commissions goes hand in hand with selling a home—unless it’s a “for sale by owner” (FSBO) deal. Understanding how they work can help buyers and sellers financially prepare for the transaction. What matters most is partnering with an experienced and reputable agent who has an up-to-date real estate license.