Real Estate Commissions & Fees

To understand who pays real estate commissions — whether it’s sellers or buyers or both — first take a look at how real estate agents are paid and how they share cooperating commissions. Don’t be embarrassed if you don’t know how commissions work because I’ve had clients who didn’t know, even though I had sold their home, represented them to buy a new home and then later listed that home for sale.

How Real Estate Commissions Work

  • Real estate agents work for a real estate broker.
  • All fees paid to a real estate agent pass through the broker.
  • Only a real estate broker can pay a real estate commission and sign a listing agreement with a seller.

Seller Pays the Buyer’s Agent Commission

The fee paid to the Buyer’s Agent Broker most commonly is paid by the seller. Some buyer broker agreements contain clauses that will compensate the brokerage for the fee it is due less the amount paid by the seller. For example, a cooperating listing might offer to pay a broker only 2.5% of the sales price, whereas the brokerage operates at fees of 3%. The difference of .5% could be paid by the buyer if the broker chooses not to waive that amount.

Listing Agents’ Fees

The most common type of listing agreement between a seller and the agent gives that agent’s broker the right to exclusively market the home. In return for bringing a buyer to the table, the seller agrees to pay a commission to the broker. Typically, this fee is represented as a percentage of the sales price and is shared between the listing broker and the broker who brings the buyer.

How Are Real Estate Agents Compensated by the Broker?

Divisions vary. New agents can receive as little as 30% to 40% of the total commission received by the brokerage. From that amount, other fees may be deducted such as advertising, sign rentals or office expenses. Top producing agents might receive 100% and pay the broker a desk fee. Everybody else falls somewhere in between.