How do Real Estate Agents get paid?

(May 31, 2016 , posted in Real Estate FAQ)

A common question on Google is "How are Real Estate agents paid? or 'Why are Real Estate agents paid so much?' These are good questions, because buying and selling real estate is one of the most expensive transactions in a lifetime. I'll deal with a regular residential transaction.

Typically, a realtor is paid based on a percentage of the sale price of the selling property.
If a property sells for $100,000, the selling brokerage(represents/lists the property for sale) will split 5-6% of that sale amount with the buying brokerage (represents the people buying the property). That would give $2500.00 to each brokerage on this $100,000 home sale.  Both brokerages would keep a portion of their share, and give the remainder to the agent/representative that did the work on the deal (This is the agent's portion) The agent will usually make anywhere from 60% to 90% of their brokerage's portion. 60% would be
$1500.00 of the $2500.00. This is taxed as income, and is used to pay advertising and all the realtor's costs.

If one brokerage represents BOTH the buyer and the seller, than the 5% commission stays with one brokerage instead of being split up. This is what happens with multiple representation.

The (above) example is easy to scale for your sale, and helps you understand where that money goes before into the pocket of the agents involved. Are the numbers surprising to you, or just what you thought? Drop me an email at dave@davemcmurray.ca with any questions!