When Do Real Estate Agents Get Paid Their Commission?

If you want to buy or sell property, you will likely work with a real estate agent. Many want to know when and how real estate agents get paid their commission.

A real estate agent will get paid once the sale of the property goes through. The escrow company pays the listing agent’s brokerage firm, which will then pay the listing real estate agent and the buyer agent’s brokerage firm. The buyer agent’s brokerage firm will pay the buyer’s real estate agent.

Real Estate Agents Get Paid When Property Is Sold

The Basic Real Estate Commission Payment Process
Related Questions
- What Does EMV Mean In Home Foreclosure Listings?
- What Does “BAC” Stand For On A Real Estate Listing?

Real Estate Agents Get Paid When Property Is Sold

A Real Estate agent will get paid when the property they have listed is sold, or they sell the property. Real estate agents usually do not receive a set salary but get paid on a sales commission basis.

For each sale that a buyer’s agent or listing agent makes, they will earn a commission. It is usually a small portion of the overall sales price, like 5% or 6%. When the house is sold, the real estate agents will be paid.

A real estate agent must work with a brokerage firm. The commission will go to the listing agent’s brokerage firm, and that brokerage firm will pay out the commission to all other parties.

As a buyer or seller of the property, you do not need to worry about how the payment is made; the buyer and listing agent’s brokerage firms will usually handle how the commission is split.

Here are a few things to remember about the commission being paid to your real estate agent:

Commission Usually Split – The commission paid for a real estate transaction is usually split between several parties, including the buyer’s agent, buyer agent’s broker, listing agent, and listing agent’s broker.
Commission Is Paid When Sale Is Completed – The commission is paid when the property sale is completed. The real estate agent will not be paid if there is no sale or the sale falls through.
Commission Rate Split – How the commission is split can usually vary according to the agreement. Some high-performing agents may receive a much higher commission cut, while new or lower-performing agents may not. It is tough to know and understand who is exactly being paid what in a real estate deal; the commission percentages are usually split confidential and agreed upon between all parties.

To discover more about this and how commissions are paid, you can read our blog on What Does “BAC” Stand For On A Real Estate Listing? By clicking here, you can read more about What Does “BAC” Stand For On A Real Estate Listing?.

The Basic Real Estate Commission Payment Process

There is an essential process for commission payments of most real estate transactions. If you sign your real estate listing with a real estate agent, it is good to understand how everyone is paid.

Here are the steps of how a real estate agent will be paid their commissions:

Real Estate Agent Signs With Brokerage – A real estate agent must be signed up with a brokerage firm. A real estate agent can only sell the real estate, but they need to have a brokerage firm complete the transaction.
Real Estate Agent And Broker Agree On Commission Split – Once the real estate agent has signed with a brokerage firm, they then agree on how the commission will be split. The commission can be split 50/50%, 60/40%, or 65/35%; there is no set or standard way the commission between an agent and broker is split.
Real Agent Gets A Listing – The real estate agent then works to get a listing. The listing agreement will be between the seller and the listing agent’s broker. A real estate agent cannot sign a listing without a listing real estate broker.

Listing Is Sold, And Transaction Closes – Once the property is sold and all the documents are signed, the transaction is closed. For the transaction to be completed, the buyer must pay the deposit, funding, and home.
Escrow Company Pays Listing Agent – Once the funding is confirmed and the property is sold, the escrow company will pay the agreed commission to the Listing Agent’s Broker. The real estate agent’s commission fee is taken directly from the proceeds from the property sale.
Listing Agent Splits Commission – As the listing agent receives the commission payment, they must immediately pay all the agents.

Listing Agent Broker pays Listing Agent – Once the sale has been completed, the Listing Real Estate Agent Broker pays the Listing Real Estate Agent they have signed with. They will be paid the commission according to their agreement.
Buyer Agent’s Broker Receives Commission – The buyer agent’s broker will receive the commission from the Listing Agent’s Real Estate Broker.
Buyer Agent’s Broker Pays Buyer Real Estate Agent – Once the Buyer Agent’s Broker has received the funds from Listing Agent Broker, they will pay their agent the agreed amount.

A few things you will notice with this is that the real estate agent can sign for a listing with a brokerage firm, but the brokerage firm handles the money, not the real estate agent. Also, the escrow company pays directly to the Listing Agent’s Brokerage firm and not to the Listing Real Estate Agent.

Here is a chart to show the process of how real estate agents are paid:

Under the law, a Real Estate agent cannot handle buying or selling a real estate property without a brokerage firm. The brokerage firms handle and pay out all the money to the real estate agents.

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What Does EMV Mean In Home Foreclosure Listings?

EMV is also used for property tax purposes to show the price a property would likely sell if in the open market. The tax authorities would use the EMV rate to assess the home’s property taxes.

By clicking here, you can read more about What Does EMV Mean In Home Foreclosure Listings?

What Does “BAC” Stand For On A Real Estate Listing?

BAC stands for Buyer Agents Commission; is the amount of commission the Buyer Agent will receive for the real estate transaction. When the commission is paid in a real estate transaction, the Buyers Agent is not the only one that is paid, but payments are usually also paid to the Buyers Agent’s Broker, the Listing Agent, and the Listing Agent’s Broker.

By clicking here, you can read more about What Does “BAC” Stand For On A Real Estate Listing?.