How does a Real Estate Agent get Paid?

March 26, 2020

Real estate agents make 100% of their money based off of commission. This commision ultimately depends on the price of the home. Generally, an agent will make 6% of the total cost of the home so if, for example, the house is $400,000 the realtor walks away with $24,000.

However, the real question you should be asking isn’t “can I afford a realtor?” but instead “who pays the realtor?”
It is the seller who pays this commission (not the buyer). A part of this commission (approx. 50%) is then given to the buyer’s realtor for bringing the client to the door. That said, the seller is paying both the realtor on the buyer side and the realtor on the seller side whereas the buyer is responsible for payments such as closing costs, title searches, title insurances, taxes, credit report charges, etc.

Take note that when a realtor on the seller side determines the listing price for the home, they will include the commission rate into the overall cost (they’ve got to make a living somehow!).

If you and your realtor go through the process of buying or selling a home and you end up not finding what you want, the realtor walks away with no money. Yes, you read that right. A realtor’s living depends 100% on the outcome. However, make sure to read the contract you sign with the realtor. If you end up wanting to break away from the realtor halfway through the process for personal or financial reason, it could be difficult to do so, depending on the fine print.

Lastly, as a buyer, know that you have the power to negotiate closing costs as these are separate from the realtor fee. However, this is where a great realtor comes in?—?someone who can negotiate on your behalf.
See?—?real estate agents DO bring a lot to the table and are more valuable than you might know! Ready to buy or sell a home? Let’s connect!