Which is the most common method of compensating a buyers agent?

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Compensation Structures for REALTORS®
Compensation Plan Basics
Compensation and Short Sales
eBooks & Other Resources
eBooks.realtor.org
Books, Videos, Research Reports & More
Commission Splits for Listing Specialists
Commission Splits for Buyers Agents

Compensation Structures for REALTORS®

NAR Member Profile (National Association of REALTORS®, 2021)

In the annual NAR Member Profile, Chapter 3, “Income and Expenses of REALTORS®,” details the compensation structure for REALTORS®, the income REALTORS® earn, and the expenses REALTORS® face, both business and otherwise. 37% of REALTORS® earn a fixed commission split (under 100%), 23% earn a graduated commission split, 15% have a capped commission split, 14% earn 100% commission, and 12% of REALTORS® earn commission in another way. The compensation structure is then broken down by type of compensation by experience and by gross personal income.

Compensation Plan Basics

The Real Estate Commission: How Much are Realtor Fees? (realtor.com®, Mar. 18, 2022)

Learn from a REALTOR® about how real estate agents are paid and how buyers/sellers compensate real estate agents. The article discusses what the real estate commission covers, what a typical compensation structure looks like for buyers and sellers’ agents, how the buyer/seller splits the compensation, and answers the question “Is a real estate commission negotiable?”

Who Pays the Commission to the Real Estate Agent? (The Balance, Jan. 7, 2022)

“Many home buyers and sellers don't understand exactly who pays the real estate agent involved in the transaction. To understand who pays real estate commissions—whether it's sellers or buyers or both—look at how real estate agents are paid and how they share cooperating commissions.”

What is a Real Estate Commission? 5 Myths Busted for First-Time Sellers (HomeLight, Jan. 6, 2022)

In this article, learn the basics about agent fees and commissions and how commission rates fluctuate with the market. Then understand the breakdown of services for both buyers and sellers that are offered because of commissions, including “prepping and presenting the house,” “working with the appraiser,” “reviewing offers,” showing properties,” and “building relationships with the sellers.” Finally, bust a few common commission related myths, including myths about discounted commissions, negotiation, and dual agency.

How Do Real Estate Commissions Work? (U.S. News and World Report, Mar. 16, 2021)

“While many professional services, like attorneys or accountants, charge by the hour, real estate agents typically work for a commission in the form of a percentage of the money exchanged in the final transaction. This money is paid out only when the deal closes, so if you are not successful in buying or selling your home, your real estate agent does not make any money. Some agents may offer flat fees for individual services, or you may find a broker that pays agents an annual salary, though this is less common than payment through commission.”

2021 National Real Estate Compensation Survey (CEL & Associates, 2021)

The annual National Real Estate Compensation Survey by CEL & Associates provides compensation salary ranges and bonus percentages for real estate agents, but also for “over 190 positions and nearly 400 participant companies in the office, industrial, retail, residential, advisory and brokerage/services sectors. It incorporates public and private companies engaged in investment, management, development, construction, leasing, and many other real estate functions.” Utilize this data to compare salary ranges for various roles throughout the real estate industry.

Methods of Compensating Real Estate Agents (The Balance, Nov. 20, 2019)

“Real estate agents are compensated in various ways, so when choosing a broker, understand that the commission arrangement may not be the most important factor. Weigh the services your broker provides to agents, as well as the expected number of prospect leads and their quality.” Understand the different types of real estate compensation structures, including “the Traditional Broker/Agent Commission Split,” “the 100% Commission Split Model,” “Referral Fees from One Brokerage to Another and Agent Split,” and “Percentage Paid to Real Estate Franchise for Business.”

Compensation and Short Sales

Short Sale Transaction and Processing Requirements (Freddie Mac, Jun. 9, 2021)

This “Seller/Servicer Guide” outlines Freddie Mac’s guidelines for short sales. “Unless a real estate broker's sales commission exceeds 6% of the Mortgaged Premises sales price, the Servicer must not, as a condition of the Servicer's acceptance of an offer, renegotiate the real estate broker's sales commission to an amount that is lower than the amount that was originally agreed upon between the broker and the Borrower. In the event the sales commission exceeds 6%, the Servicer must renegotiate the commission to limit it to 6% of the Mortgaged Premises' sales price.”

HAFA Commissions Policies (Government Affairs, National Association of REALTORS®)

This two-pager from NAR explains the Home Affordable Foreclosure Alternatives Program (HAFA) rules on commissions. Understand the differences between non-Fannie Mae/Freddie Mac loans and Fannie Mae/Freddie Mac loan rules. Regardless of the type of loan, the commission rate on short sales is limited to 6%.

Freddie Mac Short Sales Commission Policy (Government Affairs, National Association of REALTORS®)

“In discussions between NAR and Fannie Mae, Fannie Mae has reconfirmed its short sale commission policy and established a process for REALTORS® to follow if issues arise. On February 24, 2009, Fannie Mae sent Announcement 09-03 to its servicers instructing them not to negotiate commissions on short sales below the amount negotiated by the listing agent, unless the commission exceeds 6 percent. Private mortgage insurance companies and second lien holders may still seek to reduce commissions. In response to concerns raised by NAR that some servicers of Fannie Mae loans are unaware of this policy or believe it is not binding, Fannie Mae has established a process for NAR members when short sale commission issues arise.”

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

Ready-Made Employment Contracts, Letters & Forms (Kindle, eBook)

What Your CEO Needs to Know About Sales Compensation (Kindle, eBook)

Beyond 401(k)s for Small Business Owners: A Practical Guide to Incentive, Deferred Compensation, and Retirement Plans (Kindle, eBook)

Compensating the Sales Force (eBook)

Books, Videos, Research Reports & More

As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.

Center for REALTOR® Financial Wellness (National Association of REALTORS®)

31 Reasons Your Real Estate Agent is Worth Their Commission (Brand Face Real Estate, 2018)

111 Ways to Justify Your Commission: Value Adding Strategies for Real Estate Agents and Brokers (New York, NY: Kaplan, 2007) HD1382 .L44

Have an idea for a real estate topic? Send us your suggestions.

The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.

Learn the organizational structure of top real estate teams and the commission splits they implement to compensate their listing and buyers agents. It is important to remember is that sales agents working on real estate teams must embrace the idea of looking at their total sales volume and annual net income rather than being overly sensitive to their commission split percentage. Agents on real estate teams typically receive a much lower commission split percentage than solo agents, but the administrative support and leads received from the team typically enables them to sell far more homes and generate a lot more income than the majority of individual agents. To understand this point further, watch how the listings specialists and buyers agents on Claudia Restrepo’s mega real estate team help her sell more than 350 homes a year, and learn their respective commission splits in this video. Then we examine some of the typical real estate team commission split models below.

Commission Splits for Listing Specialists

Listing specialists should be paid based on their ability to generate appointments, turn appointments to listing contracts, and convert listings into accepted offers to purchase listings. The amount of their commission splits can vary depending on whether a team employs an inside sales agent (ISA) to convert leads into appointments for the listing agent. When ISAs set appointments for listing specialists, the listing agents typically receive around 25% to 35% of the listing side commission. When listing specialists generate appointments without the help of ISAs, the commission splits are typically between 35% and 45% to listing agents. Administrative listing coordinators, which are usually compensated on an hourly/salaried basis, handle all of the tasks and duties associated with the customer service and marketing of listings to enable listing specialists take more listing appointments and generate more income.

Commission Splits for Buyers Agents

Buyers agents are generally compensated on a 50/50% commission split with most real estate teams. As with listing specialists, commissions splits for buyers agents that receive appointments from inside sales agents (ISAs) are typically reduced by 10% to 20% to compensate the ISA. These commission splits may also be modified to differentiate between leads generated by the team and leads generated by the buyers agent to provide incentive for the agents to procure business from their own centers of influence (COI) are through prospecting activities. For example, a buyers agent might receive a 40% commission split on team-generated leads, and 60% for clients they procure themselves.

Agent commission splits might also be increased over the course of a year as specific goals are reached. For example, a buyers agent’s commission split might graduate from 50% to 60% after the first 15 units are closed, then graduate to 70% after 30 units are sold, and then to 80% after 50 closings. This compensation structure also creates incentive for agents to succeed and establishes a win-win scenario with the team.

Finally, real estate teams should regularly source buyers agent business to differentiate which closings resulted from leads generated by the team versus the buyers agent. Teams should also establish expectations by implementing standards for the amount of business agents procure when compared to leads provided by the team. Most real estate teams require buyers agents to generate an amount of business from their own COI and prospecting activities to equal the amount of leads provided by the team. Scoreboards should be kept and regularly shown so that all of the team members are aware as to whether buyers agents are pulling their weight by performing lead generation activities. This prevents buyers agents from becoming too dependent on receiving more of the team’s leads and demanding increased commission splits when they aren’t making enough money. Instead, they focus on lead generating for more business to increase their income.