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Real Estate Agent Commission: How Your Agent Gets Paid

Sellers traditionally paid real estate commissions for both their agent and the buyer’s agent, but industry rule changes have reshaped this approach.

Robin Rothstein
Chris Jennings
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Real estate agents make money from commissions on home sales. Understanding how your agent is paid is an important part of the homebuying 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.
Up until several years ago the standard model was for the seller to pay commissions for both agents. The seller would negotiate a commission with the listing agent, who would then split that payment with the buyer's agent at closing. Agents for sellers and buyers each typically collected a commission of around 2.5% to 3%.
However, while total real estate commissions have remained relatively steady, the way a buyer’s agent gets paid has shifted — reshaping who is responsible for covering that cost.

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Who pays the real estate commissions?

In August 2024, the National Association of Realtors (NAR) established new rules following a class-action settlement between home sellers and the real estate industry. Under the new framework, responsibility for paying the buyer’s agent commission has shifted from sellers to buyers.
That said, how a buyer’s agent gets paid remains open to negotiation. In fact, a seller can still cover the buyer’s agent commission through what’s called a cooperative compensation arrangement — essentially an agreement to share the cost of the commissions — as long as the offer is shared off the multiple listing service (MLS) in accordance with NAR rules.
Here are common ways real estate agents can be compensated:
  • Specific dollar amount
  • Flat fee
  • Percentage of sales price
  • Hourly rate
  • Cooperative compensation (in accordance with NAR rules)
In most cases, buyers and sellers must first sign an agreement when hiring their agent representatives. Buyers working with a member of NAR, for example, must sign a written buyer-agent agreement before touring a home. Terms are negotiable, but the agreement must clearly spell out how the agent will be compensated.
» MORE: What are the closing costs for the seller?
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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

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