How Do Realtors Get Paid?
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*Due to insufficient data, commission rates in these states were inferred from regional averages.
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At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logoThe Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logoEditorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. In this do-it-yourself digital age, home sellers and home buyers might well wonder if they need Realtors — or, more precisely, to pay their fees. Seriously, how crucial are these agents to a successful home sale? Aren’t they essentially getting money for nothing? Not necessarily. It makes sense to work with an agent if you’re : It takes time to research properties and put in a good offer when you’re buying. But sellers see many benefits, too. Your home will still need to be staged and listed on the market, at a competitive price. So despite the shift toward virtual showings and even sight-unseen purchases, Realtors still provide a wide variety of services to sboth ellers and buyers that are worth the commissions they charge. Let’s look at how their compensation works.How much commission do Realtors get
Only a very small portion of Realtors work on salary — the commission model is much more common. For years, the going rate was a firm 6 percent. But it began to fluctuate in the last few years, with the advent of and the rise of online, publicly accessible listings. Nowadays, , and they typically run about 5 percent to 6 percent of a home’s sale price. The exact terms of an agent’s commission vary from sale to sale, and can depend on the region and which firm they work for. Here’s roughly what you can expect to pay, based on how much your for: Home’s sale price 5% real estate commission $100,000 $5,000 $250,000 $12,500 $500,000 $25,000 $750,000 $37,500 $1,000,000 $50,000Breakdown of sellers vs buyers commission
Realtor commissions are typically paid by the home seller, explains Patrick Duffy, who runs Duffy Realty in Miami. Sellers sign a listing agreement with a Realtor in which they agree to pay a commission fee after the transaction closes. If it’s an , they pay the fee even if they found the buyer on their own. Depending on your state, the buyer may not be responsible for Realtor fees at all. Instead, both the buying and selling agents are paid with proceeds from the sale of the home. These two agents typically split the total commission — so for a 6 percent commission, the selling agent would receive 3 percent and the buying agent would receive the other 3 percent. That changes in the case of , when one agent represents both the buyer and seller. Laws about whether and how listing agents can sell the properties they’re representing to buyers vary by state. In a dual agency scenario, pay particular attention to the appraisal to ensure you’re getting a fair price. While agents have a fiduciary duty to their clients, with dual agency, the lines can get blurred. In a dual agency scenario, buyers should pay particular attention to the appraisal to ensure you’re getting a fair price. But as Realtor Sam Fish of Grass Valley, California points out, agents are bound to act ethically in their client’s best interest. “It’s in our ethics, it’s in our contract, “ says Fish. “If someone comes into my open house and they like the open house but they don’t have an agent, at that point I can say ‘let me get you an agent from my office’ so they feel like they’re being represented 100 percent as well.” Still, buyers working directly with a listing agent may have more room for negotiation because the seller may agree to a lower selling price if the agent agrees to lower their fee. If a seller already has a buyer, “we can come to the table and facilitate a contract with buyer and seller and negotiating terms so maybe the seller isn’t paying as much in fees and both sides are literally just coming to terms at a roundtable and negotiating, “ says Fish. “It just lends more creativeness to the transaction.” If working with a , “you have to sign a buyer’s agency agreement,” explains Tim Noland, a buyer’s agent with Great Mountain Properties in Murphy, North Carolina. “A true buyer’s agent works for the buyer. They protect the buyer’s investment, as opposed to the listing agent, who’s actually working for the seller.”The broker s cut
may get a cut of the commission as well. The brokerage brand RE/MAX, for example, has a split commission setup by which its agents receive 95 percent of the full commission from the sale, and 5 percent goes back to the company. “The broker has to set the policy and oversee, monitor and supervise everything the agent does,” Duffy says. “And if the agent does something fraudulent or unprofessional, the broker gets sued.”How commissions have changed over the years
Since the early 1990s, Realtor commissions have seen a . They did bump up in 2021 (for the first time since 2017) reaching an average national commission rate of , according to research firm RealTrends. That figure is down from more than 6 percent in 1991. This isn’t to say the total amount Realtors earned decreased, however. In strong , home prices are high and sellers receive multiple offers. This allows more room for negotiation on the commission, so Realtors may accept a lower commission to earn a higher amount overall. And of course, when housing prices soar, agents benefit: Their piece of the pie may be smaller, but it’s a richer slice. Since the pandemic, the decline in commission rates has been offset to a large extent by rising home prices. , Realtor commissions may rise again and become less negotiable. Even so, a seller with a high-priced listing may still be able to negotiate a lower commission more effectively.What commissions cover for sellers and buyers
You might wonder, what services does this fee buy me? One of the biggest ways buyers benefit from is gaining access to the , the database Realtors use to see and list properties for sale. An agent is also able to utilize their contacts to negotiate, find properties and take you on tours of multiple homes. It also compensates the agent for time spent answering questions and helping you through the process. The Realtor’s fee covers a wide range of costs for sellers as well, including marketing materials, staging and showing the property, coordinating open houses and contacting agents of potential buyers. As with most of the other expenses related to homeownership, a Realtor’s fee isn’t paid until the sale closes. You’ll encounter , too, from taxes to legal fees, so it will blend into the landscape of checks you’re making out.Are Realtors overpaid
The median income for real estate agents and brokers was $$48,770 annually in 2021, . Median income represents the middle of the scale: Half of all Realtors made more, half made less. Though home sellers may feel that Realtor fees are too high, Duffy argues that they’re not high enough. After all, a lot goes into listing a home, such as: Performing a to establish a competitive price Arranging for photo shoots, sometimes including aerial shots via drone Writing descriptive listing copy to attract interest from other Realtors and potential buyers Providing staging guidance Showing the property multiple times to prospective buyers Hosting on weekends Providing yard signage Making sure listings are populated on all major property search websites Helping the seller review and negotiate buyer offers When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers. And with the volatility of the current market and record low levels of inventory, Realtors frequently deal with multiple potential buyers to help you get the most out of your property.Average real estate commissions by state
Overall, the national average Realtor commission in 2022 was 5.37 percent, , an online real estate agent network. In most states, the commission ranged between 5 and 6 percent. But in states like California and Massachusetts, where expensive properties abound, the commission was typically under 5 percent. State Average commission rate Alabama 5.44% Alaska 4.99% Arizona 5.43% Arkansas 5.44% California 4.91% Colorado 5.52% Connecticut* 5.12% Delaware 5.44% Florida 5.40% Georgia 5.76% Hawaii 4.99% Idaho* 5.36% Illinois 5.24% Indiana* 5.66% Iowa* 5.66% Kansas* 5.66% Kentucky* 5.66% Louisiana* 5.44% Maine* 5.12% Maryland 5.11% Massachusetts 4.85% Michigan 5.65% Minnesota 5.41% Mississippi 5.44% Missouri 5.72% Montana* 5.36% Nebraska* 5.66% Nevada 5.02% New Hampshire* 4.97% New Jersey 5.13% New Mexico* 5.59% New York 4.97% North Carolina 5.60% North Dakota* 5.66% Ohio 5.81% Oklahoma* 5.59% Oregon 4.99% Pennsylvania 5.53% Rhode Island* 5.12% South Carolina 5.63% South Dakota* 5.66% Tennessee* 5.44% Texas* 5.59% Utah* 5.36% Vermont* 5.12% Virginia 5.22% Washington 5.30% West Virginia* 5.44% Wisconsin 5.67% Wyoming* 5.36% SOURCE: Clever*Due to insufficient data, commission rates in these states were inferred from regional averages.