How to Pay the Real Estate Agent



One of the most important things you can do when buying or selling real estate is to

hire an experienced, knowledgeable agent. The right person can make your

experience smooth and stress-free, and save you money in the long run. When

choosing an agent, it’s important to interview several candidates and screen them

carefully before hiring someone to represent you. The wrong person can cost you

tens of thousands in closing costs or lost profits.

The real estate commission is the largest single cost associated with the sale of a

home, so it’s worth discussing with your agents how they are paid. While it may

seem like an awkward topic to discuss at first, the truth is that you need to know

how much your agents are making and why they are getting paid a certain way.


Most real estate agents are paid a percentage of the final sales price once the

transaction has closed. This percentage is normally negotiated between the seller

and their agent, but can be negotiable between buyers as well. For example, if you

are selling your home and the listing agent is offering a 5% commission to sell it, the

sales price would need to be $550,000 for them to receive a $25,000 check. Keep in

mind, though, that this sum is only for the agent’s brokerage and doesn’t include

their own overhead expenses or other splits they might be having with cooperating

agents and referrals.


Some sellers will try to cut their agents’ compensation by asking for a lower

commission rate, which is perfectly fine. However, it’s important to remember that

the agents and brokers get paid only if the transaction closes, so if you do decide to

negotiate the amount of the commission, your agent may not have any money to

give you. Also read

For buyers, it’s important to ask about how their agent gets paid as well. While most

real estate agents follow a set commission structure, you should always be able to

find out if they’re a full-time or part-time professional, and what their average sales

price is. Full-time agents are typically able to offer you more competitive rates, as

they can leverage their time and expertise over the course of their career to

consistently sell homes in your area.


You also want to ask your agent what neighborhoods they specialize in and what

their track record is like. Look for an answer that includes comparable sold homes

data and details about schools, commute times, safety, and cultural amenities in the

area. This will help you gauge whether or not they are familiar with the

neighborhood and can use that knowledge to your advantage in negotiations.

As you interview your potential agents, make sure to ask them about their networks

and what other professionals they recommend. It’s a good idea to use an agent with

a strong network of mortgage brokers, inspectors, title companies, and more, as

these individuals will need to work closely with your real estate agents as you

progress through your purchase or sale.