The exact commission is set when you hire your real estate agent. This will usually be a percentage of your home’s sales price, but sometimes it can be a flat fee. (The average is 5-8% of your home’s sales price.) Once your home sells, the commission is paid to your real estate agent.
Then, behind the scenes, it’s split in a few big ways:
Broker Fees: While your real estate agent will be working for you, the real estate agent works for a sponsoring broker (or a brokerage firm). The broker or brokerage gets a share of every commission their agents make in exchange for benefits like working for a big brand name, mentorship, networking opportunities, and access to the MLS. The split can be as much as 50/50 but will vary greatly.
Buyer’s Agent: Buyers don’t have to pay their agents directly. Instead, they are paid by sharing the commission of the seller’s agent. Like broker fees, the split can vary greatly.
Next, your real estate agent will pay the expenses involved in helping your house to sell. These are:
Photography: Great real estate agents shouldn't take photos with their phones. Instead, they hire a photographer they trust to show your home in the best light possible.
Video Tours: While video used to be considered a nice bonus to complement an online listing, they have become necessary in our post-2020 market landscape.
Online Marketing: It’s not just uploading your home’s photos to the MLS and calling it a day. Instead, real estate agents develop a strategy to give your home an impressive digital presence, including a dedicated page on their website, social media strategy, and content marketing (newsletters, online advertising, and other promotional efforts).
“In Real Life” Marketing: From brochures to flyers, open houses to outreach efforts, this is everything involved in attracting potential buyers to your home.
Business Expenses: Think office supplies, travel expenses, and other costs related to their work.
Referral Fees: Some agents offer payment to the person who brings a new client their way.