How Are Real Estate Agents Paid?

If you are a buyer or seller who wishes to know if you are going to pay your agent, or simply just a reader who’s genuinely curious how they get paid then the answer for that would simply be through commissions.

In this guide, we’ll explain:

• What a real estate commission is
• Who pays the realtor
• How the money is shared between agents
• Why it’s important to understand how realtor pay works
• Examples to help you see how it all adds up

What Is a Real Estate Commission?

A commission is a fee that’s paid to a realtor when a home is sold. It’s usually a percentage of the home’s sale price. That means the more expensive the home, the more money they earn.

For example:

• If a home sells for $300,000, and the commission is 6%, then the total commission is $18,000.
   

That $18,000 doesn’t all go to one person though — it gets shared.

Seller’s Agent vs. Buyer’s Agent

There are usually two realtors involved in a home sale:

1. The seller’s agent (also called the listing agent)
2. The buyer’s agent
    

1. The Seller’s Agent

This is the realtor who helps the homeowner sell their house. They list the home for sale, take photos, arrange open houses, and work hard to attract buyers.

When a seller hires an agent, they agree on a commission percentage — for example, 5% or 6% of the sale price. This is written into the listing agreement, which is a contract between the seller and the agent’s company (called a brokerage).

2. The Buyer’s Agent

This is the realtor who helps someone buy a home. They set up showings, help the buyer find homes they like, write offers, and give advice throughout the process.

 

Who Pays the Realtor? (And What Changed in 2024)

For many years, home sellers usually paid the full commission, including the part that went to the buyer’s agent. That meant the buyer got professional help finding a home without having to pay their agent directly. But that has changed recently.

What Happened?

In 2024, there was a big legal settlement involving the National Association of Realtors (NAR). A court decided that the old way of handling buyer commissions was unfair and confusing for many people. As a result, new rules were created to make things more open and transparent.

One of the biggest changes? Buyers are now responsible for paying their own agent directly.

So… What Does That Mean?

Now, if you're buying a home, you’ll need to talk with your agent ahead of time and agree on:

• How much they will be paid
• How that payment will work
• Whether you’re paying out-of-pocket or negotiating it as part of your offer
   

This is called a Buyer Representation Agreement, and it’s usually signed before your agent shows you homes. It says what your agent will do for you, and how much their services will cost.

Can Buyers Still Ask Sellers to Cover That Cost?

Yes, since the buyer commission to be shouldered by the seller is not automatic anymore.

Buyers can negotiate with the seller to contribute toward their agent's commission as part of the offer. For example, you might offer to buy the home at full price but ask the seller to pay a certain dollar amount toward your closing costs, which could include your agent’s fee.

But it’s up to the seller to say yes or no. That’s something your agent can help you negotiate.

Why the Change?

The idea behind the 2024 NAR settlement was to:

• Make things more fair and clear
• Help buyers understand what they’re paying for
• Give people more choice and control over agent fees

Instead of everything being bundled into one big commission behind the scenes, now the fees are more out in the open, and buyers and agents must agree to them up front.

A Quick Example

Before 2024, a $400,000 home would have a commission of 6%, which would be automatically deducted to the seller's proceeds, and this 6% commission would be split between the two agents, which would be 3% each for both the listing and buyer agent. On a $400,000 home, each agent would take home $12,000.

After 2024, the seller still has to pay his listing agent, but the buyer will have to pay his agent out of his own pocket based on an agreement before they enter an agreement with the seller. The amount for the seller would be 3% of the purchase price which is $12,000 but the buyer’s commission will be determined based on the agreement between buyer and agent. Both of them could also negotiate with the seller if the seller agrees to shoulder it. Before 2024 it is automatically the seller’s burden.

Agents Don’t Receive Commission Directly

When a real estate deal closes, the commission doesn't go straight into the agent's pocket. It's first paid to the agent's brokerage, which then splits it with the individual agent based on their internal agreement. A more experienced or high-producing agent might keep 80% while the brokerage takes 20%, while a newer agent might be on a 70/30 split. It's a layer of the process most buyers and sellers never see.

Not All Agents Work the Same Way

The traditional commission model isn't the only option. Some agents work on a flat-fee basis, charging a set dollar amount regardless of the home's sale price — which can be a bargain on higher-priced homes. Discount brokerages like Redfin have also carved out a space by offering lower commission rates, though sometimes with a more streamlined, less hands-on experience.

Then there's the For Sale By Owner (FSBO) route, where the seller skips the listing agent entirely and pockets those savings themselves. It's not without its challenges — pricing, marketing, and negotiations all fall on the seller — but for the right person, it can be worth it. Even in FSBO situations, a buyer's agent may still be involved if the buyer is working with one, so commission doesn't always disappear completely from the picture.

 

Why Do Realtors Earn Commission?

Selling a home isn’t free or easy! Realtors spend a lot of time and money helping you with the sale. Here are some of the things they might pay for out of their own pocket:

• Professional photos of your home
• Online ads and social media posts
• Printed brochures and flyers
• Open house signs and snacks
• Time spent showing the home
• Phone calls, emails, and follow-ups
• Driving to and from showings or meetings
• Training, licensing, and insurance fees

A lot of this happens before a sale is ever made. If your home doesn’t sell, the agent usually doesn’t get paid at all — even after doing all that work. That’s why commission is so important. It rewards the realtor for a job well done only when the sale is completed.

Why You Should Know How Realtor Pay Works

Understanding how your realtor gets paid can help you:

• Know where your money is going if you're selling a home
• Understand your agent’s motivation — they only get paid if the deal closes
• Feel confident when discussing commission with your agent
   

It’s okay to ask your realtor how they get paid, what services are included, and what you’re getting for your money. A good agent will be happy to explain everything clearly.

 

 

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