Working with a real estate agent is par for the course when buying or selling a home, so it’s good to know how they get paid for their real estate commission, what specific duties they should or shouldn’t be involved in, and their role in helping you into the home and neighborhood that best suits your lifestyle.
Typically, a real estate agent is paid on commission based on a home’s sale price. (In certain cases, their commission is a flat fee.) When a commission is based on a percentage, the agents get 6%— split between the buyer’s agent and the seller’s agent—and always paid by the seller. If you’re using the same agent to trade up or downsize, they’ll receive the 3% commission twice, but on differing values.
Real estate agents work for brokers, and agents and brokers are both licensed by the state in which they work. The broker acts as an umbrella company and the agent is essentially a salesperson working for that company. Although a real estate agent can’t work independently from a broker and can’t be paid directly by a buyer or seller, a broker doesn’t need to work with an agent. However, a broker is the one who receives the agent’s commission and splits it between all agents involved in the transaction.
Because of the level of involvement, the 6% commission is typically split four ways: The seller’s agent, the seller’s broker, the buyer’s agent, and the buyer’s broker all get a piece of the pie. The broker and agent have separate agreements dictating what percentage of the commission each receives, and therefore your specific agent’s commission may and will most likely be less than the full 3% on the buyer or seller’s side. However, if the broker and agent helped you sell and buy, the brokerage will receive the full 6% and split it however they deem appropriate.
Because your agent can get you in or out of a house or neighborhood, they’re the source of truth when it comes to the best practices in real estate transactions and should be trusted. Make sure you’re working with an agent that has your specific needs and wants in mind before jumping into the real estate market.
Originally published Mar 21, 2016. Updated August 11, 2017.
Have you seen other uses for your real estate agent’s commission? Share your experience in the comments below.