Last Updated: 04.05.2023
by Rinas Bullatovci
Real Estate Agent Commissions
Whether you’re buying or selling a home, chances are you’ll be working with a real estate agent at some point in the process. But have you ever wondered how much these professionals earn for their services? In this article, we’ll take a closer look at the world of real estate agent commissions, exploring the state of the real estate market, the typical commission rates in each state, and the income of real estate agents.
Key Takeaways: May 2023 Data
✓ Real estate agents have experienced significant commission growth in 2023. The national average real estate agent commission has surged from 4.94% in 2020 to 5.37% in 2023, marking the most substantial increase in a decade. (RentSpree)
✓ On average, real estate agents typically earn approximately 1.5% of the selling price of a home after deducting brokerage fees.
✓ Real estate agents' compensation is primarily based on commission, and based on data from Indeed, the typical annual income for a real estate agent is $95,624. (Indeed)
✓ Over 3 million real estate licensees are currently active in the United States, as estimated by The Association of Real Estate License Law Officials (ARELLO). (NAR.Realtor)
Section 01
Overview of the Real Estate Market
Section 02
Home Seller Statistics
Section 03
Real Estate Agent Commissions in Each State
Section 04
Average National Real Estate Commission
Section 05
Average Number of Homes Sold per Active Agent
Section 06
How Much Do Real Estate Agents Earn?
Section
01
Overview of the Real Estate Market
The U.S. real estate market is vast and dynamic, with millions of transactions occurring annually and over 3 million active licensees managing residential and commercial properties. Commissions for real estate agents typically range between 5% and 6% of the sale price, with buyer's and seller's agents each earning 2.5% to 3%.
In 2022, the National Association of REALTORS reported the sale of 5.64 million pre-owned homes.
The U.S. Census Bureau recorded the sale of 822,000 new homes(link is external) in 2020.
The Association of Real Estate License Law Officials approximates more than 3 million active real estate license holders in the United States.
In the United States, 106,548 real estate brokerage companies are currently in operation.
In 2018, the United States had 5.9 million commercial properties, totaling 97.0 billion square feet of floor area.
According to the 2018 American Community Survey, the United States has around 119.7 million inhabited residential units.
Based on the 2021 Profile of Home Buyers and Sellers, the average home seller has resided in their property for 8 years.
The average house size measures 1,900 square feet.
The average homeowner's age is 45 years.
According to the Federal Reserve's Survey of Consumer Finances in 2019, 64.9% of families held ownership of their main residence.
Per Redfin data, the median sale price for homes in Atlanta in December 2022 stood at $390,000.
A real estate commission of 5 percent on that price would amount to $19,500.
However, in San Francisco, with a significantly higher median of $1.28 million, a 5 percent commission would equate to $64,000.
Real estate commission generally ranges between 5% and 6% of the property's sale price.
In the majority of regions, the buyer's agent earns a commission of 2.5% to 3%.
The seller's agent is awarded a commission of 2.5% to 3%.
Section
02
Home Seller Statistics
Home sellers usually hire real estate agents, with referrals and past collaborations being significant sources of leads. With approximately 5.3 million pre-owned homes sold in 2019 and 87% of homebuyers using agents, approximately 9.2 million home sale transactions per year are believed to involve real estate agents.
In 2020, the average home seller was 60 years old, had a median household income of $93,200, and resided in their property for a decade.
When selling their homes, 86% of sellers sought the assistance of a real estate agent.
Sellers recently have typically achieved 100% of their listing price, with 38% of them indicating that they lowered the asking price at least once.
On average, a home was listed for sale for a duration of 2 weeks before being sold.
Of the sellers who utilized a real estate agent, 36% discovered their agents via a referral from friends or family members.
Additionally, 27% of sellers opted to work with an agent they had previously collaborated with for buying or selling a property.
A notable 73% of sellers expressed that they would definitely use the same agent again for future transactions.
Approximately 5.3 million pre-owned homes were sold in 2019.
There are around 10.6 million chances every year for real estate agents to earn commissions through existing home sales.
87% of homebuyers availed the services of a real estate agent or broker while purchasing their property.
We can estimate that 87% of the 10.6 million home sale transactions involve real estate agents, based on this statistic.
This suggests that approximately 9.2 million home sale transactions per year involve a real estate agent.
Section
03
Real Estate Agent Commissions in Each State
This section provides information on the average real estate commission rates for agents in different states of the US. The commission rates can vary widely between states, with some states having much lower rates than others. This information can be useful for those who are looking to buy or sell a property and want to be aware of the commission rates they may encounter in different states.
In Alabama, the average real estate commission rate for agents is 5.65%, which places the state at the 37th (tied) position for the lowest average realtor fees.
Alaska's average real estate commission rate for agents is 5.11%, which positions the state at 3rd place (tied) for the lowest average realtor fees.
In Arizona, the average real estate commission rate is 5.40%, and the state ranks 23rd for the lowest average realtor fees.
Arkansas has an average real estate commission rate of 5.55%, placing it in a 28th (tie) position for the lowest average realtor fees.
California has an average real estate commission rate of 5.02% for agents, ranking the state at 2nd place for the lowest average realtor fees.
Colorado is ranked 26th for the lowest average realtor fees, with an average real estate commission rate of 5.46% for agents.
Connecticut is placed at 7th (tie) for the lowest average realtor fees, with an average real estate commission rate of 5.26% for agents.
Delaware has an average real estate commission rate of 5.55%, ranking the state at 28th place (tie) for the lowest average realtor fees.
The District of Columbia is ranked 1st for the lowest average realtor fees, with an average real estate commission rate of 4.90%.
Florida's average real estate commission rate for agents is 5.50%, and the state is ranked 27th for the lowest average realtor fees.
Georgia has an average real estate commission rate of 5.75% for agents, and the state is ranked 45th for the lowest average realtor fees.
Hawaii's average real estate commission rate for agents is 5.11%, and the state is ranked 3rd (tie) for the lowest average realtor fees.
Idaho has an average real estate commission rate of 5.36% for agents, and the state is ranked 18th (tie) for the lowest average realtor fees.
Illinois is ranked 17th for the lowest average realtor fees, with an average real estate commission rate of 5.35% for agents.
Indiana has an average real estate commission rate of 5.74% for agents, placing the state at 44th for the lowest average realtor fees.
Iowa's average real estate commission rate for agents is 5.66%, and the state is ranked 39th (tie) for the lowest average realtor fees.
Kansas has an average real estate commission rate of 5.66% for agents, and the state is ranked 39th (tie) for the lowest average realtor fees.
Kentucky's average real estate commission rate for agents is 5.55%, ranking the state at 28th place (tie) for the lowest average realtor fees.
Louisiana ranks at 28th place (tie) for the lowest average realtor fees, with an average real estate commission rate of 5.55% for agents.
Maine's average real estate commission rate for agents is 5.26%, and the state is ranked 7th (tie) for the lowest average realtor fees.
Maryland has an average real estate commission rate of 5.28% for agents, and the state is ranked 14th for the lowest average realtor fees.
Massachusetts ranks at 7th (tie) place for the lowest average realtor fees, with an average real estate commission rate of 5.26% for agents.
Michigan's average real estate commission rate for agents is 5.44%, and the state is ranked 24th for the lowest average realtor fees.
Minnesota's average real estate commission rate for agents is 5.77%, and the state is ranked 46th for the lowest average realtor fees.
Mississippi's average real estate commission rate for agents is 5.55%, and the state is ranked 28th (tie) for the lowest average realtor fees.
Missouri has the highest average realtor fees in the country, with an average real estate commission rate of 6.07% for agents.
Montana's average real estate commission rate for agents is 5.36%, and the state is ranked 18th (tie) for the lowest average realtor fees.
Nebraska's average real estate commission rate for agents is 5.66%, and the state is ranked 39th (tie) for the lowest average realtor fees.
The mean commission rate for real estate agents in Nevada is 5.36%, and the state is placed at 18th (in a tie) for the least expensive average realtor fees.
The state of New Hampshire has an average real estate commission rate of 5.26%, and it ranks 7th (tied) for having the lowest average realtor fees.
The state of New Jersey has an average real estate commission rate of 5.17%, which places it at 6th for the lowest average realtor fees.
The state of New Mexico has an average real estate commission rate of 5.59%, ranking it 35th (tied) for the lowest average realtor fees.
New York ranks 15th (tie) among states with the lowest average realtor fees, with an average real estate commission rate of 5.29%.
North Carolina has the 47th lowest average realtor fees with a real estate commission rate of 5.78% for agents.
Real estate agents in North Dakota typically charge a commission rate of 5.66%, and the state ranks 39th (tie) for the lowest average realtor fees.
With an average real estate commission rate of 5.82%, Ohio ranks last for the lowest average realtor fees.
The state of Oklahoma has an average real estate commission rate of 5.59%, and is ranked 35th (tied) among states with the lowest average realtor fees.
Oregon has an average real estate commission rate of 5.15%, which puts the state in the 5th position for the lowest average realtor fees.
The state of Pennsylvania has an average real estate commission rate of 5.26%, placing it in a 7th place tie for the lowest average realtor fees.
Rhode Island has an average real estate commission rate of 5.26%, placing it in 7th (tied) position among states with the lowest average realtor fees.
The average commission rate for real estate agents in South Carolina is 5.79%, placing the state at 48th place for the lowest average realtor fees.
South Dakota ranks 39th (tied) for the lowest average realtor fees, with an average real estate commission rate of 5.66%.
Tennessee has an average real estate commission rate of 5.57%, and it ranks 34th for the lowest average realtor fees.
The state of Texas has an average real estate commission rate of 5.65%, which ranks 37th (tied) for the lowest average realtor fees.
The average commission rate for real estate agents in Utah is 5.36%, and the state is tied at 18th place for the lowest average realtor fees.
The typical commission rate for real estate agents in Vermont is 5.26%, and the state is ranked 7th (tied) for the lowest average realtor fees.
The typical commission rate for real estate agents in Virginia is 5.30%, and the state is ranked 16th for having one of the lowest average realtor fees.
The state of Washington has an average real estate commission rate of 5.45%, placing it at 25th in the list of states ranked by the lowest average realtor fees.
The average real estate commission rate in West Virginia is 5.55%, and the state ranks 28th for the lowest average realtor fees.
Wisconsin has the second highest average real estate commission rate at 5.81%, while Wyoming ranks 18th (tie) with an average commission rate of 5.36%.
Section
04
Average National Real Estate Commission
When buying or selling a home, one of the biggest costs to consider is the commission paid to real estate agents. In this section, we'll take a look at the average commission rates for both listing agents and buyer's agents across the United States.
Typically, the national average commission for both the buyer's and listing agent is around 5% to 6% of the sale price of the property.
In certain cities, real estate commissions for home sellers may be as low as 4%.
Meanwhile, residential real estate commissions in other cities can go as high as 7%.
For commercial properties, the commission rate can be as high as 10%.
The average commission rate for real estate agents in the US is 5.49%.
Of that commission, approximately 2.72% is allocated to the listing agent.
The remaining 2.65% is allocated to the buyer's agent.
Based on this rate, selling a $150,000 home in the US would result in realtor fees of around $8,055.
For a $700,000 home, the realtor fees would be approximately $37,590.
Although the typical fee per agent is around 2.5-3%, the amount you end up paying will depend on the commission rates that you negotiate with your listing agent.
Commission rates for listing agents across the nation usually fall within the range of 2.26% to 3.17%.
On average, listing agents in the US charge a commission rate of 2.72%.
If a home sold for $327,514, the listing agent's commission would typically range from $7,402 to $10,382.
The commission rates for listing agents can vary by as much as 40% depending on your location.
Across the US, buyer's agents typically receive a commission of 2.19% to 3.17%, with an average rate of 2.65%.
If a home sold for $327,514, the typical commission for the buyer's agent would range from $7,173 to $10,382.
The commission rates for buyer's agents can vary by 0.88 percentage points depending on the state you live in.
Section
05
Average Number of Homes Sold per Active Agent
Real estate agents play a significant role in the US housing market, as 87% of homebuyers purchase their home through an agent or broker. In 2019, there were roughly 10.6 million opportunities for agents to earn a commission on existing home sales, with an average of 7 homes sold per agent.
In 2019, approximately 5.3 million existing homes were sold.
There are roughly 10.6 million opportunities every year for real estate agents to earn a commission on existing home sales.
According to the National Association of Realtors, 87% of homebuyers in the US purchased their home through a real estate agent or broker.
Real estate agents support approximately 87% of the 10.6 million buy and sell sides in existing home sales.
This implies that every year there are approximately 9.2 million buy and sell sides involving a real estate agent.
It is estimated that the average agent assists buyers and/or sellers in approximately 7 homes per year.
The typical price for an existing home sale is approximately $265,000.
Approximately $1.4 trillion worth of existing residential homes are sold annually.
With an average real estate commission of around 5.7%, the total potential for real estate commissions is approximately $80 billion.
It is estimated that agents receive approximately $70 billion in commissions each year.
According to Hurdlr's estimates, the average real estate agent incurs about $6,500 in annual expenses.
As a result, the typical agent earns around $37,000 in pre-tax income, taking into account the average commission of $51,200 and estimated annual expenses of $6,500 according to Hurdlr's analysis.
Section
06
How Much Do Real Estate Agents Earn?
Real estate agents typically earn money upon completing the sale of a home, and their commission is contingent on the number of homes they sell. The majority of agents receive payment via a listing agreement signed by the seller and listing agent.
Real estate agents' salaries fluctuate annually as they are paid through a performance-based commission system.
The annual income of a real estate agent is determined by the number of properties they sell and the commission they earn on each sale.
In the United States, the mean yearly income for a real estate agent is $94,031.
On average, a real estate agent earns $6,658 per month.
The commission for a home sale typically ranges from 5% to 6% of the listing price, but can vary from 1% to 10% depending on the specific agreement.
In a standard commission split, the agent receives 60% while the broker takes 40%.
Alternative commission arrangements may involve different ratios such as 50/50 or 70/30, and some brokerage firms might require an additional marketing fee.
Real estate agents in big cities such as New York City and Los Angeles have higher earning potential than those in smaller or rural areas.
Assuming a real estate agent lists a property in an upscale neighborhood with an average listing price of $500,000, as opposed to $200,000, the agent can anticipate earning a larger commission on the sale.
When a home priced at $300,000 is sold at a commission rate of 6%, the resulting commission amounts to $18,000.
The listing broker and the buyer's agent broker shared $18,000 equally, with each receiving $9,000.
The brokers allocate the $9,000 to the agents, dividing it in a 60/40 ratio.
The listing agent and buyer's agent received $5,400 each, which is 60% of the $9,000 commission. Meanwhile, each broker retained $3,600.