Compensation Methods for Real Estate Agents


Most real estate agents get paid through a commission structure on the sale of property. This is typically based on a percentage of the selling price and can vary widely depending on the specific circumstances of each deal.

The most common percentage is 6% of the selling price, but this is by no means the only option. Other fee structures exist such as flat fees or a percentage of the mortgage amount, and many discount residential brokerages offer standard commission rates that are far lower than traditional options. Also read

In any case, the most important thing to understand is that real estate agent commissions are always negotiable. Even the most established and well-respected agencies will negotiate with you to find the right solution for your needs and situation.

A common myth is that you will have to pay your real estate agent if they don’t sell your home. While this can happen in very rare cases, it is far more common for a buyer to back out of a transaction. This may be due to financing issues, a change in personal circumstances, or a change in their ability to secure a mortgage.

When you become liable for your real estate agent’s fee depends on when you sign the purchase and sale agreement (P&S) and make a deposit. This usually happens within a few weeks of listing the home. However, this can be delayed if the seller is still interested in the property and/or has issues with their mortgage approval.

In that scenario, the listing agent might ask you to sign a waiver of their fee and agree to a new deal. This is very unusual and it’s best to work with your agent to come up with a better solution.

As in other professions, the income that real estate agents and brokers take home is eroded by taxes. Federal, state, and self-employment taxes along with business expenses such as insurance, Multiple Listing Service (MLS) fees, and advertising can all take a sizable chunk out of an agent’s earnings.

Lawsuits against real estate industry leaders, including the National Association of Realtors, have challenged the traditional model that the seller will offer (and pay) a commission to the buyers’ agent upon closing. While a final ruling is likely to be appealed, the attention this issue has received may eventually lead to changes in how real estate agents are compensated.

If you’re ready to avoid the awkward conversation with your real estate agent about how much to charge, let Clever pre-negotiate a lower rate for you. Our concierge-style service matches you with top real estate agents who have agreed to a reduced commission. You can also use our app to find the perfect agent for you based on your preferences and location. Simply share a few details about your real estate goals and we’ll match you with an agent who will exceed your expectations. Start your search today.



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