Ever wondered what a real estate agent makes from the sale of a house or property? Here you will get a break-down of real estate agents’ commissions:

Real Estate Agents and Their Commissions Explained

Many people don’t understand real estate agent commissions and how they are structured. We’ve been in the real estate business for some time now and are still amazed how little the general public knows about agents’ and brokers’ commissions, so we’re going to explain commissions in detail.

Please keep in mind this article refers to commissions in the state of California and will be speaking to how government rules and regulations affect commissions for realty professionals in that state. Your state may have different regulations. So let’s get started:

First, commissions are usually a standard 6% of the total sales price, but land is usually a standard 10%. So if a home sells for $100,000, the total commission amount would be $6,000.

Sound like a lot for the cost of sale? Let’s look how the commissions are broken up:

Say you’ve hired a REALTOR to sell your home. They work for a broker like Coldwell Banker, like we do. Now let’s say your agent advertises your home and another agent brings an interested buyer. That agent also works for another broker. That 6% will be broken up in 4 ways, essentially:

Your agent receives 1.5% of the sale, or $1,500. Your agent’s broker receives 1.5% of the sale, or $1,500. The buyer’s agent receives 1.5% of the sale, or $1,500 and the buyer’s agent broker receives 1.5% of the sale, or $1,500.

If your agent lists and sells 12 homes in a year, or one a month they make $1,500 a month, or $18,000 a year! So be kind to real estate agents; they really don’t make a fortune and the good ones actually work hard.

The breakdown of the commissions between agents, buyer agents and brokers are negotiated between them, but we used the example above for simplicity in the explanation.

Now here’s a little secret that’s really not a secret:

Commissions can be negotiated! In fact, if you real a standard listing agreement, it says right on the front page that commissions can be negotiated. The California Department of Real Estate requires that real estate agents and brokers are honest about this, and most are.

The other thing about real estate commissions is that each agent and/or broker has different opinions about negotiating commissions. Some will negotiate a lower commission and some will not. It just depends on the real estate professional and the details of the sale.

The explanation above is the basics of how commissions work, and there are other variables that can affect and complicated them, but this article was intended to give a simple description to exactly how REALTORS and brokers are paid.

If have questions or would like to talk with us, call (888) 9-List-It. That’s (888) 954-7848. Or use our Contact Us form below and we will get back to you as soon as possible: