A real estate agent gets paid a commission — a negotiated percentage of the home’s final sale price — and only when the deal actually closes. The money comes out of the closing proceeds and is split between the brokerages involved, then split again with the individual agents. On a $400,000 sale at a 5.5% total commission, that’s $22,000 in fees carved out at the closing table.
Who writes the check has changed. Until August 2024, sellers almost always paid both sides. After a nationwide settlement involving the National Association of Realtors, buyer-agent pay is now something buyers negotiate directly with their own agent, in writing, before touring a home.
Commission Is a Percentage of the Sale Price, Paid at Closing
Agents don’t earn an hourly wage or a salary from a brokerage. Their entire pay is contingent on a transaction closing. If a deal collapses — financing falls through, the buyer walks, an inspection kills it — the agent earns nothing for the weeks or months of showings, marketing, and negotiation that went into it.
That structure has tax consequences too. The IRS classifies licensed real estate agents as statutory nonemployees, treated as self-employed for all federal tax purposes, as long as their pay is tied to sales output rather than hours worked and their contract says they won’t be treated as employees.1Internal Revenue Service. Licensed Real Estate Agents – Real Estate Tax Tips
Who Actually Pays the Commission
For decades, the seller paid everything. The listing agreement set a total commission percentage, that amount was deducted from the seller’s proceeds at closing, and the listing brokerage split it with the buyer’s brokerage. Buyers never wrote a check for their agent.
The 2024 NAR settlement changed the mechanics. Offers of buyer-agent compensation can no longer appear on the Multiple Listing Service. Sellers can still agree to cover the buyer’s agent through off-MLS negotiations, and general seller concessions toward a buyer’s closing costs are still allowed on MLS listings, as long as those concessions aren’t conditioned on payment to a buyer’s broker.2National Association of REALTORS®. NAR Settlement FAQs
The practical result: buyer-agent pay is no longer quietly baked into every listing. Sellers often still offer it as a way to attract more offers. When they don’t, the buyer pays their own agent according to the written buyer agreement. Major mortgage agencies don’t currently let buyers roll agent commissions into their loan, so those fees come out of pocket or have to be negotiated into the deal.
Written Buyer Agreements Are Now Required Before Touring
Agents who work with MLS-listed properties must now have a signed written agreement with any buyer before touring a home, in person or on a live virtual walkthrough. Casual conversation at an open house or asking an agent about their services doesn’t trigger the requirement.3National Association of REALTORS®. What the NAR Settlement Means for Home Buyers and Sellers
That written agreement has to spell out the agent’s compensation specifically — a dollar figure, flat fee, percentage, or hourly rate, not an open-ended formula. It must cap what the agent can collect at the amount stated in the contract, no matter where the money ultimately comes from. And it has to state conspicuously that broker fees are fully negotiable and not set by law.3National Association of REALTORS®. What the NAR Settlement Means for Home Buyers and Sellers
Read that agreement carefully. It’s the document that determines whether you owe your agent money if the seller doesn’t cover their fee.
What Commissions Typically Run
There is no standard rate. Any agent who tells you otherwise is wrong. Rates are negotiable on every transaction.
Market averages exist, though. As of late 2025 data, the national average total commission was 5.57%, with listing agents averaging about 2.82% and buyer’s agents averaging around 2.75%. Totals have been drifting down from the long-standing 6% figure, and the post-settlement environment is pushing that trend further as buyer-agent fees face direct scrutiny from the people now negotiating them.
What moves the number on any given deal:
- Higher-priced homes sometimes command lower percentage rates because the dollar amount is already large.
- Fast-moving seller’s markets can pull rates down on properties expected to sell quickly with minimal effort.
- Full-service representation — marketing, staging coordination, active negotiation — generally costs more than limited-service arrangements.
How the Commission Splits Between Brokerages and Agents
Agents don’t pocket the full commission. In most states, licensing laws require that commission payments flow through the agent’s sponsoring broker. The agent can’t take money directly from a client or from another brokerage; the broker who holds the license collects the check.
A typical transaction runs through a four-way split. The total commission divides first between the listing brokerage and the buyer’s brokerage. Each brokerage then splits its share with the individual agent who did the work. An agent on a 70/30 split keeps 70% of their brokerage’s portion.
On that same $400,000 sale at 5.5%:
- Total commission: $22,000
- Each brokerage’s share on a 50/50 split: $11,000
- Agent’s share at 70/30 with their brokerage: $7,700
Split ratios vary widely. New agents often start at 50/50 and negotiate better terms as they build a track record. The agent also pays their own business expenses out of that share — marketing, vehicle costs, continuing education, errors and omissions insurance — before arriving at actual take-home pay.
When the Money Actually Lands
The commission check doesn’t arrive until closing. A neutral third party — an escrow agent, settlement agent, or closing attorney depending on the state — manages the distribution of every dollar per the Closing Disclosure, the document that itemizes each line item in the transaction and identifies who receives what.4Consumer Financial Protection Bureau. Closing Disclosure Explainer
The agent’s payout is released only after every contract contingency is satisfied and the deed is recorded with the local government. A buyer default at the last minute, or financing that falls apart, means the agent earns nothing for months of work. That’s why agents tend to work hard at solving problems that threaten a closing. Their whole paycheck rides on it.
What the Agent Keeps After Taxes
Because agents are treated as self-employed, no one withholds taxes from their commission checks. They owe both the employee and employer portions of Social Security and Medicare on their net earnings, a combined self-employment tax of 15.3% — 12.4% for Social Security and 2.9% for Medicare.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only to net earnings up to $184,500 in 2026; Medicare has no cap.6Social Security Administration. Contribution and Benefit Base
Agents who expect to owe $1,000 or more when they file must make quarterly estimated tax payments to the IRS.7Internal Revenue Service. Estimated Taxes Miss those deadlines and penalties and interest follow. A $50,000 commission year alone generates roughly $7,650 in self-employment tax before income tax even enters the picture, and the IRS expects that money spread across the year rather than dropped in at filing time.