Real Estate Agent Commission Structure Explained

When buying or selling a home, one of the most common questions people ask is: “How do real estate agents get paid?” The answer lies in a structured commission system that can sometimes seem confusing at first. In this article, we’ll break down the real estate agent commission structure, explain how it works, who pays it, and what you need to watch for during your transaction.

What Is a Real Estate Commission?

A real estate commission is the fee paid to a real estate agent for facilitating the buying or selling of a property. It's typically calculated as a percentage of the property’s final sale price. Rather than charging an hourly rate or flat fee, most agents work on commission, earning only when the deal closes.

How Much Is the Commission?

In most real estate transactions, the total commission ranges between 5% to 6% of the home’s sale price. This amount is not fixed by law and can vary based on region, market conditions, and agreement terms.

For example, if a home sells for $500,000 with a 6% commission rate, the total commission would be:

$500,000 x 6% = $30,000

This $30,000 is then typically split between the buyer’s agent and the seller’s agent.

Who Pays the Commission?

While the commission benefits both agents involved, it’s usually the seller who pays the total commission from the proceeds of the home sale. That commission is then shared between:

Listing Agent (Seller's Agent) – the agent who represents the seller

Buyer’s Agent – the agent who represents the buyer

So, even though both agents get paid, the seller technically foots the bill from the final sales price.

Commission Splits: How Is It Divided?

Let’s break down how the commission is shared:

Between Buyer and Seller Agents:
The total commission (e.g., 6%) is split, often equally, so each side gets 3%.

Between Agent and Brokerage:
Real estate agents usually work under a brokerage, which also takes a cut. The typical splits vary:

50/50 split – new or less experienced agents

70/30 or 80/20 – more experienced agents or top performers

So, a 3% commission to the buyer’s agent might be split again, with 1.5% going to the agent and 1.5% to their brokerage.

Example Breakdown

Let’s say you sell your home for $400,000 at a 6% total commission:

Total commission: $24,000

Split between agents: $12,000 each

After broker split (e.g., 70/30):

Agent receives: $8,400

Brokerage receives: $3,600

This kind of breakdown is common, though terms vary by agent, brokerage, and region.

Can the Commission Be Negotiated?

Yes, real estate commissions are negotiable. While 5–6% is the norm in many areas, sellers can often negotiate:

A lower rate, especially if the property is in high demand

A flat-fee arrangement, offered by some discount brokerages

Incentive-based structures, where the agent earns more if the home sells above a certain price

However, agents may be less willing to reduce their fee in competitive or complex markets where more effort is required.

What About Dual Agency?

In some transactions, a single agent represents both the buyer and the seller — known as dual agency. In this case, the agent may keep the entire commission (e.g., 6%) but must remain neutral to avoid conflict of interest.

Not all states allow dual agency, and it may not always be in your best interest. Make sure to understand the pros and cons before agreeing to it.

Alternatives to Traditional Commission Models

The real estate industry is evolving, and new commission models are emerging:

Flat-fee MLS services

Discount brokerages

Online real estate platforms

These options can reduce commission costs but may offer fewer services. Always weigh the potential savings against the level of support you’ll receive.

Why Do Agents Earn That Much?

Real estate agents do more than show homes. They handle:

Market research and pricing strategy

Professional photography and staging

Marketing, listing, and showings

Negotiations and paperwork

Legal disclosures and closing coordination

Commission compensates them for time, expertise, and the risk of earning nothing if a deal falls through.

Final Thoughts

Understanding the real estate agent commission structure helps both buyers and sellers make informed decisions. While 5–6% is standard, there’s flexibility depending on the agent, market, and services provided.

Whether you're selling your first home or investing in real estate, always ask your agent about their commission rate and services — and don’t be afraid to negotiate.