How Real Estate Commission Works


I explain the ins and outs of how real estate agents get paid.

Today’s question came up while one of our agents was out with one of our clients this week: How do real estate agents get paid? I thought some of you might also be wondering, so here’s the answer: An agent’s commission comes from the sale price of the property. 

There’s a big debate of who should effectively pay this, the seller or the buyer — It’s a whole chicken and egg thing that I don’t want to get into here. I will walk you through how it all works though, and let you form your own opinion.

The seller enters into a listing agreement with the listing broker. If you work with us, you’d be listing with Keller Williams Three Bridges. In that agreement, the broker dictates the commission that goes to the buyer’s agent. So when it goes in the MLS, the agent can see that commission, and, yes, it’s great advertising. A lot of other sites will pull from the MLS to show the listings online, but the original purpose of it was to offer commissions to buyer brokers.

Hopefully, after everyone’s gotten their split, there’s still some money left to buy groceries.

Typically, half of the total commission goes to the listing broker and the other half to the buyer broker.

Now, every brokerage wants to be paid, so not all of that money is going to the agent. How much and how this is paid depends. Some offices have the agent write a check every month, some take a split, and some do a hybrid. This tends to be related to the services the brokerage is offering the agent.

On top of this four-way split, the agents are going to have expenses that cut into how much they made. 

On the listing side, there are showing services, virtual tours, and signs (which get stolen a lot) that all cost money. I’ve had kids tell me the signs make good sleds in winter; please don’t steal my signs and use them as a sled. The buying side takes more time, so agents on both sides tend to make about the same amount.

So that’s how we get paid, and hopefully, after everyone’s gotten their split, there’s still some money left to buy groceries. I hope you found this helpful, and if you have any more questions you’d like us to make a video on, send them in to us. If we use your idea, we’ll give you a $25 Starbucks gift card. As always, if you’d like to ask me a question directly or want my help selling your home, feel free to give me a call.