When Sarah sold her home, it was a whirlwind experience. Between the constant stream of showings, open houses, negotiations, and paperwork, she finally felt relieved to sign the closing papers and hand over the keys. But as she sat in the real estate office, reviewing the breakdown of fees and costs, one line item made her pause: the commission paid to her real estate agent. The sale price of her home was $350,000, and the commission totaled $21,000. Sarah had always wondered: How much of that goes to her agent? Does the real estate agent pocket the entire amount? Curious about what agents truly earn, Sarah asked her agent about the commission breakdown—and discovered that there’s much more to it than meets the eye.
Like Sarah, many homeowners and aspiring real estate agents alike wonder how much do real estate agents make per sale While commissions can vary greatly depending on the property’s value, market conditions, and the agreement terms, the basic structure of how agents are paid remains consistent. This article explores how real estate commissions work, breaks down what agents earn per sale, and examines the factors impacting their final take-home pay. We’ll also use industry statistics to illustrate the earnings potential in different markets and give you a clearer picture of a realtor’s income.
How Real Estate Commissions Work
In most real estate transactions, agents are paid through a commission-based structure. This means they don’t earn a salary; they make money based on a percentage of the home’s sale price. The commission is typically negotiated between the seller and the listing agent when the home is listed for sale, and it usually falls between 5% and 6% of the sale price. However, it can be higher or lower depending on market conditions and the specific agreement.
Here’s how a typical real estate commission is structured:
- The total commission is split between the seller’s agent (the listing agent) and the buyer’s agent (the agent representing the buyer).
- For example, a $350,000 home sale with a 6% commission would result in a total commission of $21,000.
- That $21,000 is usually split 50/50, meaning the seller’s and buyer’s agents earn $10,500 before further deductions.
However, that $10,500 doesn’t go directly into the agent’s pocket. Most agents work under a brokerage, which provides them with resources like office space, marketing, legal support, and mentorship. In exchange, the brokerage takes a percentage of the agent’s commission. The exact split between agent and brokerage can vary depending on the agent’s experience, the specific brokerage, and whether the agent is part of a team.
How Much Does a Real Estate Agent Make Per Sale?
Let’s break it down using the $350,000 sale example with a 6% commission:
- Total Commission: 6% of $350,000 = $21,000
- Split Between Seller’s Agent and Buyer’s Agent:
- $21,000 / 2 = $10,500 for each agent
- Brokerage Split:
- Most agents work under a brokerage and split their commission with the broker. The brokerage’s cut can range from 20% to 50%, depending on the agent’s experience and the broker’s policies. Let’s assume a 70/30 split (standard for newer agents), meaning the agent keeps 70% of their commission, and the brokerage takes 30%.
- Agent’s share: $10,500 x 0.70 = $7,350
- Brokerage’s share: $10,500 x 0.30 = $3,150
In this case, the real estate agent would take home $7,350 from the sale of a $350,000 home after paying their brokerage.
Factors That Impact Realtor Commissions
While the math above shows how a typical real estate commission works, several factors can impact how much a realtor makes per sale:
- Commission Rate
The total commission rate can vary based on the location, type of property, and the market’s competitive landscape. In hot real estate markets with lots of competition, agents may charge lower commissions—closer to 5% or even 4%—to attract clients. On higher-priced luxury properties, the percentage might also be negotiated lower. In contrast, commissions might be higher in less competitive markets or specialized transactions (like commercial real estate).
For instance, if Sarah’s agent had negotiated a 5% commission on her $350,000 home, the total commission would have been $17,500 rather than $21,000, lowering the agent’s earnings after the brokerage split.
- Brokerage Split
The split between the agent and their brokerage varies depending on their experience, sales volume, and agreement with their broker. For new agents, it’s common to have a 50/50 split with their brokerage, meaning they keep only half of their commission. More experienced agents or top performers may negotiate higher splits, such as 80/20 or even 90/10, allowing them to keep more of their commission.
Some brokerages, particularly those operating on a flat-fee model, allow agents to keep 100% of their commission in exchange for a monthly desk fee or transaction fee. These brokerages can be attractive to high-volume agents, but they must balance the higher upfront costs with the potential to keep all their earnings.
- Other Expenses
Agents don’t just pocket their commissions; business expenses are also to consider. These can include:
- Marketing costs include advertising the property, hiring professional photographers, creating listing materials, staging homes, and more.
- Transportation costs: Driving to and from showings, open houses, and client meetings.
- Association fees: Membership in local, state, and national real estate associations like the National Association of Realtors (NAR) typically costs several hundred dollars a year.
- Licensing and continuing education: Agents must maintain a valid real estate license and complete continuing education, both of which have associated costs.
These expenses can significantly reduce an agent’s earnings, particularly for agents who are just starting or only close a few transactions yearly.
Industry Statistics: What Do Realtors Earn Annually?
While real estate agents are paid per transaction, their annual income depends on how many transactions they close in a year and the prices of the homes they sell. According to the National Association of Realtors (NAR), in 2022:
- The median gross income of Realtors was $48,770.
- Realtors with 16 years of experience earned a median income of $85,000.
- Realtors with two years or less experience earned a median income of around $9,300.
However, these figures vary greatly depending on location. Real estate agents can earn far more per sale in high-cost areas like California or New York, where home prices are significantly higher than the national average. For example, an agent selling a $1 million home at a 5% commission would earn $25,000 in commission (before brokerage splits), much higher than an agent selling a $250,000 home would make.
The Role of Real Estate Teams
In recent years, many real estate agents have joined or formed real estate teams, which can impact their earnings. Multiple agents collaborate on transactions on a team but split the commission. For example, if Sarah’s agent had been part of a real estate team, their commission would likely have been further divided among the team members, lowering their sales earnings. However, working on a team can provide agents with additional support, leads, and access to marketing resources.
Conclusion: What Real Estate Agents Make Per Sale
While it may seem like real estate agents make a substantial amount of money from each sale, their earnings are influenced by several factors, including the commission rate, their split with the brokerage, and their business expenses. On a $350,000 home sale with a 6% commission, a realtor might earn $7,350 after the brokerage split. Still, they also have to cover expenses like marketing, transportation, and association fees, which can further reduce their take-home pay.
Real estate is a commission-based industry, and while there is potential for significant earnings—particularly in high-cost markets or for agents handling luxury properties—agents must work hard to build a successful career, manage their expenses, and close multiple transactions to achieve financial stability for aspiring real estate agents, understanding the complete picture of how commissions work can help them navigate the industry’s challenges and build a lucrative career over time
