Real estate agents are paid by commission, not salary, and the money comes from the seller's proceeds at closing

When you buy or sell a home, the real estate agent does not bill you directly. Instead, the seller's agent and the buyer's agent split a commission that comes out of the sale price at closing. The commission is typically between 4 and 6 percent of the home's sale price, though this varies by region, market conditions, and what the agent negotiates with their broker. The seller's agent receives their half, and the buyer's agent receives their half — but both amounts come from the seller's side of the closing statement.

This means if you are the buyer, you do not write a check to your agent. If you are the seller, the commission is deducted from what you receive at closing. The exact split between the two agents, and the exact percentage, is set by the listing agreement (the contract between the seller and the seller's agent) and is negotiable.

Key Takeaways

  • Real estate agents work on commission, typically 4 to 6 percent of the sale price, split between the seller's agent and the buyer's agent.
  • The commission comes from the seller's proceeds at closing, not from a separate bill to the buyer.
  • The seller's agent and buyer's agent each keep their half, though agents must pay a portion to their brokerage firm.
  • Commission rates and splits are negotiable and vary by market, property type, and local custom.
  • If you are the buyer, you typically pay nothing out of pocket to your agent; if you are the seller, the commission reduces your net proceeds.

How the commission is split at closing

At closing, the title company or attorney prepares a closing statement that itemizes all money in and out. The real estate commission appears as a line item deducted from the sale price. If the home sells for $400,000 and the total commission is 5 percent ($20,000), that $20,000 is split: the seller's agent gets $10,000 and the buyer's agent gets $10,000. Both amounts are paid from the seller's side of the closing statement.

Each agent then pays a portion of their commission to their brokerage firm. The brokerage takes a cut — often 50 to 80 percent of what the agent earned, depending on the agent's experience and the brokerage's policies — and the agent keeps the remainder. So in the example above, if the buyer's agent's brokerage takes 60 percent, the agent keeps $4,000 of the $10,000 they earned.

The buyer does not receive an invoice for this commission. It is built into the purchase price and closing costs. When you get a loan, the lender factors the sale price (including the commission) into the loan amount, so the commission is effectively paid through your mortgage.

Why the buyer does not pay the agent directly

Real estate commissions are a cost of selling, not buying. The seller is the one who hired the listing agent and agreed to pay commission as part of the listing agreement. The buyer's agent is compensated from that same pool because the listing agreement typically includes an offer to pay the buyer's agent a set percentage (usually half the total commission) if a buyer is brought to the table.

This structure exists because the seller controls the listing and sets the terms. The seller agrees to pay commission to move the property, and part of that commission goes to whoever brings a buyer. If you are the buyer and you work with an agent, that agent is paid from the seller's commission — you do not negotiate a separate fee with them.

However, this does not mean the buyer pays nothing. The commission is factored into the sale price. If a home is listed at $400,000 with a 5 percent commission, the seller is effectively asking $400,000 minus the $20,000 commission they will owe. In a market where commissions are negotiated down, the sale price may reflect that savings.

What happens if you buy without an agent

If you buy a home without an agent (called a "for sale by owner" or FSBO transaction), the seller may offer to pay the buyer's agent commission anyway, or they may not. Some sellers list FSBO specifically to avoid paying commission and expect buyers to negotiate the price down. Others offer the standard buyer's agent commission to attract more offers.

If you represent yourself and the seller has not offered buyer's agent commission, you will not receive any payment. If the seller does offer it, you can negotiate to receive it — but you are not may have access to to it by law. The listing agreement is between the seller and their agent (or the seller and no one, in an FSBO sale), and you are not a party to it.

Commission rates vary by market and are negotiable

The 5 to 6 percent figure is a common starting point, but it is not a rule. Commission rates vary by region, property type, and market conditions. In some markets, the standard is 4 percent; in others, it is 6 percent or higher. Luxury properties sometimes have lower commission rates (2 to 3 percent) because the dollar amount is large. New construction or investment properties may have different rates.

Commission is negotiable. A seller can offer less than the market standard, and an agent can accept it. If you are selling, you can propose a lower commission rate when you interview agents or sign a listing agreement. If you are buying, you cannot directly negotiate your agent's commission (that is between the seller and their agent), but you can choose to work with an agent whose brokerage has different policies or you can negotiate the sale price knowing what commission will be paid.

The role of the brokerage and broker

Individual real estate agents do not work independently. They work under a brokerage firm, which holds the license and handles the legal and financial side of transactions. When an agent earns commission, the brokerage takes a percentage before the agent sees any money. The brokerage also handles trust accounts, closing coordination, and compliance with real estate law.

The split between agent and brokerage varies widely. A new agent might give the brokerage 70 to 80 percent of commission; an experienced agent with a strong track record might keep 60 to 80 percent. Some brokerages charge a flat fee per transaction instead of a percentage. The agent's split is negotiated when they join the brokerage and may improve as they produce more business.

What you should know about commission before buying or selling

If you are selling, the commission is a cost that reduces your net proceeds. When you interview agents, ask them what commission rate they recommend and what their brokerage's policies are. You can negotiate the rate, and you should understand it before you sign the listing agreement. A lower commission rate means more money in your pocket, but it may also affect how aggressively the agent markets the property or how much the buyer's agent is incentivized to show it.

If you are buying, understand that your agent is paid from the seller's commission, not by you. This does not mean your agent works for free or that you should not use one — it means the compensation structure is built into the transaction. You should still interview agents and choose one you trust, because your agent's job is to represent your interests, not the seller's.

In either case, commission is negotiable and varies. Do not assume the rate you hear from one agent applies everywhere or that it cannot be discussed.

Frequently Asked Questions

Do I have to pay my real estate agent if I am the buyer?

No. Your agent is paid from the seller's commission at closing. You do not write a check to your agent. However, the commission is factored into the sale price, so you are indirectly paying for it through your mortgage.

Can a seller refuse to pay the buyer's agent commission?

Yes. The seller controls the listing agreement and can offer any commission rate they choose, including zero. If the seller offers no buyer's agent commission, your agent may still show you the property, but they will not be paid unless you negotiate a separate arrangement with the seller.

What if the buyer's agent and seller's agent are the same person?

This is called a "dual agent" situation and is legal in most states, though it requires disclosure to both buyer and seller. The agent represents both sides and receives the full commission (or their brokerage's share of it). Dual agency can create a conflict of interest, so some buyers and sellers prefer to work with separate agents.

Can I negotiate my agent's commission as a buyer?

You cannot directly negotiate the commission your agent receives, because that is set by the listing agreement between the seller and the seller's agent. However, you can negotiate the sale price of the home, which indirectly affects the commission amount.

Do real estate agents ever work for a flat fee instead of commission?

Yes. Some brokerages and agents offer flat-fee or hourly arrangements, particularly for services like listing a property or representing a buyer in a limited capacity. These are less common than commission-based arrangements, but they exist and may be worth exploring if you want to reduce costs.