Real Estate Agent Commission and Fees: What Are They and Who Pays?

Real Estate

Real estate broker fees for both the buying and the selling broker are typically paid for by the seller.

Most of the broker fees hover around 5%- 6% and is split between the buyer and seller’s broker. Each real estate broker would be getting anywhere from 2.5%-3% as a commission when the sale closes.

These fees are negotiated on the front end by the seller’s real estate agent. The cooperating broker who decides to show you the home, will know how much that number is before setting up a showing.

But you as a buyer, pay nothing to work with a buyer’s agent. Thus, it would be to your benefit to contract a real estate professional that is working for you, that someone else is paying for.

Real Estate Disclosure Form

This form helps parties understand the role of the real estate agent in the transaction.

Some buyer agents may ask you to sign an agency agreement right off the bat. This informs all parties about who is representing whom. In this case, You. Whether you sign it on the font end or the back end, it is a mandatory state and national disclosure that is required.

Seller’s agents have this state required disclosure filled out as soon as the seller decides to list the house with the selling real estate agent.

Once in a while there will be something called a dual agency. This is where the real estate agent represents both the buyer and the seller in a neutral capacity. This form gives informed consent that is signed by both parties.

When do real estate agents get paid their commission?

First off, real estate agents don’t get paid by the hour, are 100% commission based and 1099’s. They only get paid if the deal goes through.

You can be working with one for two years, and they get paid nothing. So, imagine all the hours, phone calls, showings, emails and other forms of communication or information they worked for and are not get paid.

They only get paid at closing…but even have one more step to go before actually being able to deposit that check in the bank.

At closing, the check is cut by the attorney or escrow company for the agreed amount. This amount doesn’t go directly to the real estate agent, it goes to the agent’s principal broker. The principal broker then takes their cut from the agent’s check, then writes a check to the real estate agent.

Only then does it make it to your agent’s bank.

Other Real Estate Agent Fees

There are other forms of real estate aside from houses that also require commissions to be paid, that are outside of buying or selling of a house.

Vacant land for instance can be anywhere from 10%-20% commission since it takes much longer to sell this type of real property than a home.

You also have rental commissions. In typical marketplaces the landlord will give an incentive of about $300-$500 for a rental referral.

In Manhattan, it is the renter who pays the real estate agent’s fee. That fee is a hefty 15% of an annual rental contract. If you rent a typical $3000 one bedroom, you will be paying $5400 in broker fees alone.

Commercial brokers typically fall between 4%-8% for deals under $1m, but that number goes down as the sale price goes up.

Related Posts

What Do Attorneys Do in a Real Estate Transaction?

What Do Attorneys Do in a Real Estate Transaction?

Responsibilities of a Real Estate Attorney Reviewing documents - such as purchase agreements, title documents, mortgage docs, transfer documents and typically represents a buyer or a seller. They are certified professionals who oversee the legal aspects of real estate...

Understanding Your Real Estate Contract

Understanding Your Real Estate Contract

Real estate contract, purchase agreement, sale agreement, purchase contract - what do they all mean? These terms are actually referring to the same thing - a legally binding contract between a buyer and seller that outlines the specifics of the transaction. Learning...

How To Pick the Right Real Estate Agent

How To Pick the Right Real Estate Agent

How to pick a real estate agent? Picking the right real estate agent is like picking the right team captain to head your team. Not only do they know how to recommend you other players on your team to find the right qualified people to ensure your success, but ensures...

Do I Need a Real Estate Agent?

Do I Need a Real Estate Agent?

Do I Need a Real Estate Agent to Buy a House? The short answer is, no. But as a buyer, why would you want to turn down free representation? And someone that has sole fiduciary responsibilities to only you? It costs you nothing to work with a real estate agent as a...

Real Estate Agent vs Broker vs Realtor

Real Estate Agent vs Broker vs Realtor

What's the difference between a real estate agent and a broker? A real estate agent, broker, or Realtor™ all have one goal, to bring buyer and seller together to close a real estate transaction. All three have the same fiduciary responsibilities to their client, which...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI