Real Estate Agent Commission: How Your Agent Gets Paid

Real estate agents make money from commissions on home sales. Understanding how your agent is paid is an important part of the home buying and selling process.

» MORE: What is a discount real estate broker?

Average real estate agent commission

Typical real estate agent commissions have historically been 5% to 6% of the home sale price, or $20,000 to $24,000 on a $400,000 home. But that could change, as a new system of paying agents went into effect in August 2024.

Under the previous system, the seller negotiated a commission with the listing agent, who split the payment at closing with the buyer's agent. Agents for sellers and buyers each typically collected a commission of around 2.5% to 3%. Those amounts might eventually go up or down under the new system, in which buyers negotiate the commissions for their own agents.

It could take months or even years for a new "typical" commission to emerge, as agents compete on price and the levels of service they offer.

Who pays the real estate commissions?

Before listing a home for sale, the seller negotiates a commission with the listing agent. At closing, the seller pays the listing agent the agreed-upon commission.

Sometime before making an offer on a home, the buyer negotiates a commission with the buyer's agent. The commission can be a percentage of the home price, a flat fee or an hourly rate.

Then, when negotiating the purchase offer, the buyer and seller can bargain over who will pay the buyer's agent. The seller may pay the buyer's agent, the buyer may pay their own agent, or the seller and buyer can share the cost.

The payment of the buyer's agent adds complexity to negotiations. The buyer can ask the seller to pay the commission out of the proceeds of the sale, or the buyer can add their agent's commission to the offer price. Or if they can afford to, the buyer can pay their agent's commission out of pocket. If allowed, they might even use down payment assistance from a first-time home buyer's program to offset the commission.

Sellers may build in the cost of agent commissions when pricing their homes.

» MORE: What are the closing costs for the seller?

Alternatives to paying traditional real estate commissions

If you don’t want to pay traditional real estate agent commissions, consider these options.

Use a discount real estate broker

Real estate brokers are agents who have taken additional coursework, passed an exam and gotten licensed as brokers. They can head up their own brokerages, operate independently, oversee agents or work under managing brokers.

Discount real estate brokers help home sellers save money with lower commission rates or flat fees. Some discount brokers, such as Clever Real Estate and Ideal Agent, help you find agents and negotiate lower rates for you. Other companies, such as Houwzer and Redfin, have their own in-house agents. The pricing structures and service levels vary by company, so you'll want to shop around to find the best fit.

Sell your home yourself

Selling without a listing agent can cut the agent commission in half, but the "for sale by owner" option isn't for everyone. Handling the marketing, negotiating and navigating the legalities of selling a home requires skill and a lot of time. Make sure you have the time and energy to devote to the task before doing it on your own.

» MORE: Why you should stop waiting to sell your home