How Realtors® Get Paid

Honestly, most folks don’t put much thought into how real estate Realtors make money – neither the commission percentages nor from which side of the deal the fees come.  Obviously, one must assume that compensation comes from somewhere, or no one would be in business. Office space, copy machines, and yard signs don’t pay for themselves.

Most buyers are surprised to learn that real estate commissions usually come from the seller.  When the home is sold, the seller’s Realtor splits the listing fee with the buyer’s Realtor.   Sometimes, the listing side commission is not enough to cover the buyer side compensation.  In these cases, the buyer is responsible for paying their brokerage at closing.  The amount will be credited with any amount paid by the seller.   For example, buyer broker compensation is 3%.  Seller is paying 2%.  Buyer is responsible for 1% to buyer’s brokerage at closing.

Splits between Realtors are normally 50/50, so if a listing Realtor procures a 6% listing fee, the buyer and seller Realtors will each receive 3% when the deal is done.

Here’s an example of how real estate commissions work.

Note: There’s another scenario where the buy-side commission is split even further. When a Realtor refers their client to another Realtor (typically in another market), the referring Realtor is paid a referral fee, typically 25 -35% of the buy-side commission.


Final Thoughts on REALTOR® Pay

If you’re read this far, you now know how Realtors get paid and how commission splits work. You also know that there are more parties to the transaction than just the two Realtors representing the buyer and seller. Realtors incur many expenses that eat into those seemingly wonderful profits. To be sure, it’s fun and rewarding profession with many responsibilities.