For many aspiring professionals, the allure of a career in real estate lies in its unlimited potential. Unlike a traditional nine-to-five job with a capped salary, real estate offers you the freedom to build your own business and define your own success. While commission-based income might seem daunting at first, it is actually one of the most exciting aspects of the industry.
Understanding exactly how real estate agents get paid is the first step toward building a lucrative career. This guide explores the ins and outs of real estate agent compensation, from traditional commission structures to the latest industry changes that are reshaping how agents earn a living.
Key Takeaways
- Understand Commission Structures: Real estate agents typically earn income through commissions, which are a percentage of the property’s sale price.
- Explore Different Models: Emerging industry changes, such as flat-fee services or alternative commission models, provide new opportunities for agents to earn.
- Maximize Your Earnings Potential: Building strong client relationships and honing negotiation skills can significantly increase your overall income.
- Adapt To Industry Trends: Staying informed about shifts in the real estate landscape ensures you remain competitive and ahead of the curve.
- Invest In Personal Development: Continually improving your market knowledge and expertise sets the foundation for a long-term, successful career.
How Real Estate Commissions Typically Work
At its core, real estate agent compensation typically involves a commission paid to agents for facilitating the sale of a property. Traditionally, when a property owner decides to sell, they hire a listing agent (or seller’s agent) to represent them. The homeowner and the listing agent agree on a commission rate, typically a percentage of the home’s final sale price.
Historically, this total commission (typically 5%-6%) was split between the listing agent and the buyer’s agent. The listing agent would market the property on the Multiple Listing Service (MLS) and offer a portion of their commission to the agent who brought a qualified buyer. In the past, the buyer’s agent commission would be advertised on the MLS.
However, the process involves more than just a handshake. Once a transaction reaches the “closing” stage, an escrow company or title company plays a vital role. They act as a neutral third party, collecting the funds from the buyer and lender. Upon closing, the escrow officer disburses the funds according to the contract instructions. This includes paying off the seller’s mortgage, covering closing costs, and distributing the commission checks to the respective brokerages.
Who Pays Agent Fees and Closing Costs?
A common question among new agents and clients alike is: who actually foots the bill? In other words, who pays the REALTOR® fees in a real estate transaction?
- The Seller: Traditionally, the seller has paid the total commission from the sale proceeds. This amount is deducted from the final sale price before the seller receives their net profit.
- The Buyer: In some evolving models and specific transaction types, buyers may be responsible for paying their agent directly. This is becoming a more prominent conversation due to recent legal shifts (discussed below).
Who pays closing costs?
Closing costs are fees associated with finalizing a real estate transaction, such as loan origination fees, title insurance, and appraisal fees. Typically, both buyers and sellers share responsibility for closing costs, but who pays what can vary based on the contract terms. Buyers typically cover costs associated with their loan, while sellers often pay for expenses such as title insurance and transfer taxes. Remember, closing costs are often negotiable.
Recent Changes and Legal Issues
The real estate landscape is constantly shifting, and staying informed is crucial for your success. In March 2024, the National Association of REALTORS® (NAR) reached a settlement to resolve nationwide claims regarding broker commissions. These changes, which took effect in August 2024, have altered how compensation is communicated and negotiated.
Key Updates You Need to Know:
- Removal of Compensation Offers from MLS: Listing agents can no longer make offers of compensation to buyer brokers on the MLS. While sellers can still offer concessions or negotiate to pay the buyer’s agent, this information must be communicated off-MLS.
- Mandatory Written Buyer Agreements: Agents must enter into written agreements with buyers before showing a property. These agreements must clearly outline the specific services provided by the agent and the compensation the agent expects to receive.
The Department of Justice has also maintained an active interest in these proceedings to ensure that new rules promote transparency and competition. For you, this means that articulating your value proposition to buyers is more important than ever. You must be prepared to explain your fee structure and negotiate your worth directly.
Types of Commission Structures for Real Estate Agents
When you join a brokerage, you will agree to a specific commission structure. This determines how much of the gross commission you keep and how much goes to the broker.
50/50 Split
This is a straightforward arrangement where you and the brokerage each receive 50% of the commission.
- Pros: Often includes significant mentorship, leads, and office support, making it great for new agents
- Cons: You keep a smaller portion of your earnings
Graduated Split
This structure rewards high performance. You might start at a 60/40 split (60% to you), but once you generate a certain amount of revenue, your split increases to 70/30, 80/20, or higher.
- Pros: Incentivizes hard work and success
- Cons: The “clock” often resets every year
Tiered Split
Similar to the graduated split, a tiered split changes commission percentages at different levels. For example, you might earn 50% on total sales greater than $1 million, 60% on sales exceeding $1.5 million, and 65% for sales beyond $2 million. These tiered commission structures are common in real estate, with higher sales thresholds reflecting industry standards.
100% Commission
Some brokerages allow experienced agents to keep 100% of their commission. In exchange, the agent pays a monthly “desk fee” or a flat transaction fee.
- Pros: Maximum earning potential per deal
- Cons: You typically pay for your own marketing, technology, and office space, and receive less support
Salaried
A minority of brokerages, such as Redfin, pay agents a base salary plus bonuses based on customer satisfaction or sales volume.
- Pros: Stability and benefits like health insurance
- Cons: Capped earning potential compared to pure commission models
Alternative Compensation Models
As the industry modernizes, alternative models are gaining traction.
- Flat-Fee Services: Some agents charge a fixed fee (e.g., $5,000) to list a home or assist a buyer, regardless of the property’s price. This can attract budget-conscious clients but requires high volume to be profitable.
- Hourly Rates: While rare in residential sales, some real estate consultants charge an hourly rate for specific services, such as market analysis or contract review, rather than a full commission.
Commission Splits and Variations
Your “split” is the percentage of the commission you retain after your broker takes their share. For example, if the gross commission is $15,000 and you have a 70/30 split, your broker takes $4,500, and you keep $10,500.
Negotiating your split
Remember, everything in real estate is negotiable, including your split. If you consistently bring in business and require less supervision, you have leverage to negotiate a better rate with your broker. When interviewing brokerages, ask about:
- Commission Caps: Is there a maximum amount the broker takes per year?
- Franchise Fees: Are there additional fees on top of the split?
Negotiability of Commissions and Fees
With the recent NAR settlement, the conversation around negotiable commissions is louder than ever. Commissions are not set by law; they are fully negotiable between agents and their clients.
- With Sellers: You can negotiate your listing fee based on the marketing plan and level of service you provide.
- With Buyers: You must discuss your fee upfront. If a seller is not offering concessions to cover your fee, you need to be comfortable asking your buyer to pay for your services directly.
Mastering the art of negotiation is essential for standing out in today’s real estate market. The Real Estate Negotiation Institute (RENI) offers unparalleled training designed to elevate your career and empower you to reach new heights.
Whether you are looking to solidify your foundation or master the buyer-side experience, RENI provides the tools you need to succeed:
- Certified Negotiation Expert (CNE): This is the premier foundational training for agents who want to become expert negotiators. You will learn to navigate every phase of the transaction lifecycle, from client acquisition and listing to the purchase contract and closing.
- Certified Buyer Agent Expert (CBAE): Don’t let market changes hold you back; take control of your career by learning how to define and convey your unique strengths. Stand out as the preferred choice and lead your buyers with confidence.
Examples and Case Studies
To visualize how this works, let’s look at two scenarios for a home selling for $500,000.
Scenario A: The traditional approach
The seller agrees to a 6% total commission, split evenly.
- Listing Brokerage receives 3% ($15,000).
- Buyer Brokerage receives 3% ($15,000).
- Agent Take-Home: If both agents are on a 70/30 split, they each earn $10,500 before taxes and expenses.
Scenario B: The buyer-paid model
The seller agrees to pay their listing agent 3% but offers no concessions for the buyer’s agent.
- Listing Brokerage receives 3% ($15,000) from the seller’s proceeds.
- The buyer pays their agent 2.5% ($12,500) directly at closing as per their buyer agreement.
How Much Do Real Estate Agents Make?
The income potential in real estate varies widely based on experience, location, and hours worked. According to the U.S. Bureau of Labor Statistics (May 2024), the median annual wage for real estate sales agents is $56,320.
However, full-time dedication often yields higher rewards. According to survey data cited in the Colibri Real Estate Salary Guide, full-time agents can earn significantly more, with some averages ranging between $100,000 and $200,000. Factors influencing your income include:
- Market Conditions: Inventory levels and interest rates.
- Experience: Building a referral network takes time.
- Niche: Luxury and commercial real estate often command higher fees.
Ready to Start Your Career?
Navigating real estate agent compensation can seem complex, but it fundamentally rewards those who are driven, knowledgeable, and ready to serve their clients. Whether you are interested in a traditional commission split or an alternative model, the first step is education.
Colibri Real Estate empowers agents and brokers to start or advance their careers with flexible learning solutions. If you are ready to take control of your future, sign up for our quality online pre-licensing courses today.
Disclaimer: This guide is for general informational purposes only, based on a September 2025 survey of Colibri Real Estate School alumni and publicly available industry sources. While Colibri Real Estate School strives for accuracy, we make no guarantees regarding the completeness, reliability, or applicability of the information. Earnings and outcomes vary widely based on factors like location, experience, and market conditions and should not be considered guarantees. This guide does not constitute professional advice. Users should consult additional sources for personalized guidance.
