Whether you are a home buyer or seller, you're likely to work with a real estate agent for your transaction. It's clearly a popular business, and that leads us to wonder: Unlike other professionals who bill their clients at hourly rates, real estate professionals are paid at the end of a sales transaction.

If a real estate agent works with a buyer or a seller for weeks or months without a resulting transaction, they aren't paid for their time. Agents earn a commission based on the sales price of the home and receive that commission only after the transaction goes to settlement.

Commissions are negotiable between listing agents and their clients. So how much does a real estate agent make? It depends on the closing price of the home. In many cases the commission is evenly split between the buyer's agent and the listing agent , but sometimes the split is negotiated unevenly. For example, a seller could agree to pay a 5. While some real estate agents are also brokers or associate brokers—positions that require extra training and licensing—commission payments go to the broker who manages the real estate brokerage where the agent works.

The commission is then split between the broker and the agent according to their agreement. The commission split varies from one agent to another, with new agents sometimes earning a smaller percentage of the commission than experienced agents or successful ones who sell more homes or more expensive properties.

The commission is split at the settlement table between the listing agent's brokerage and the buyer's agent's brokerage; then the agents themselves are paid by their brokers. Technically, the total commission is always paid by the seller at the settlement table, where the fee is subtracted from the proceeds of the home sale.

However, the sellers will take the agent's commission into account when determining a listing price. So, in a sense, the buyers are paying the commission because they're paying to buy the house. The exact percentage of the commission should be spelled out in the listing agent's contract with the seller. Listing agents and their brokers spend time and money marketing a home, advertising, and preparing the home for sale, so the commission pays for those services.

Buyer's agents typically have a contract with their clients so they are paid when the buyer completes a purchase, even if the buyers found that particular property on their own.

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How Much Real Estate Agents Earn a Year

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