Frequently Asked Questions
How much commission do real estate agents make?
Real estate agents typically earn 2.5-3% of the sale price on each side of a transaction. On a $400,000 home, that's $10,000-12,000 before broker splits. After a typical 70/30 split, an agent takes home $7,000-8,400. Top producers in expensive markets can earn $200,000+ annually.
What is a typical broker split?
Broker splits vary widely based on experience and brokerage model:
• New agents: 50/50 or 60/40
• Experienced agents: 70/30 or 80/20
• Top producers: 85/15 or 90/10
• 100% brokerages: Flat monthly fee ($500-1,500) + per-transaction fee
What fees come out of my commission?
Common deductions include:
• Broker split: 20-50% to your brokerage
• Transaction/desk fee: $100-500 per deal
• Franchise fee: 3-8% for national brands
• Referral fees: 25-35% if lead came from another agent
• E&O insurance: $500-1,500/year (often included)
Do I pay taxes on real estate commissions?
Yes, as an independent contractor you'll pay:
• Self-employment tax: 15.3% (Social Security + Medicare)
• Federal income tax: 10-37% based on your bracket
• State income tax: 0-13% depending on your state
Plan to set aside 25-35% of gross commissions for taxes. You can deduct business expenses like marketing, MLS fees, CRM costs, mileage, and continuing education.
Are commission rates negotiable?
Yes, commission rates are always negotiable. The "standard" 5-6% is a guideline, not a rule. Factors that affect negotiation include:
• Property price (higher prices may warrant lower %)
• Market conditions (seller's vs buyer's market)
• Services provided (full service vs limited)
• Repeat business or referrals
Post-NAR settlement (2024), buyers may also need to negotiate their agent's fee separately.