How Do Real Estate Agents Get Paid?

It's a question I get all of the time -- and it's a great question!

While there are special circumstances, most Real Estate Agents are 1099 employees who work 100% on commission. So who pays the commission?

Buyers Agents

The agent representing the buyer is referred to as the Buyers Agent or Selling Agent, simple enough right? They are paid by the sellers after closing. There is no standard percentage, and this number will vary property to property.

This means that in the majority of transactions the buyer does not pay the buyer's agent! However, there are cases where a seller will not pay commission, like if you purchase a for sale by owner home, so be aware that the North Carolina Buyer's Agency Agreement does state that the buyers agent will be paid a certain percentage, possibly by the buyers should the seller refuse. If you are about to see a home where the seller will not pay, your Realtor should let you know prior to seeing the home. At the end of the day buyers agents work hard, especially in this market, and deserve to paid accordingly. If you do choose to purchase a FSBO, just know that using a buyers agent will probably save you money in the long run and a good buyers agent is worth every penny!

Listing Agents

The listing agent is the agent that is representing the sellers in the transaction. They are paid by the sellers at closing. The amount they are paid is negotiated between the agent and the sellers. There is no standard amount, but don't be surprised if the agent's brokerage requires a certain minimum percentage to be charged. This is to make sure there is enough money to pay everyone involved fairly for their hard work!

This commission is then split between both agents in the transaction.

Here's an example:

The seller and listing agent agree upon a 6% commission. They agreed to pay the buyers agent 2.4% leaving 3.6% for the listing agent. They close on the property for $200,000.

Buyer side - $200,000 x 6% = $12,000 x 2.4% = $2,880

Seller side - $200,000 x 6% = $12,000 x 3.6% = $4,320

Keep in mind that these numbers do not include the portion that goes to each agent's firms, taxes which are not taken out, and the overall costs of doing business. Real Estate Agents also only get paid when they close on a property, so none of their work is compensated until the end of the transaction.

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