Many people think real estate agents are overpaid, assuming that the entire 6.00% of the commission goes straight to the Realtor®’s pocket. This is far from the truth as the typical Realtor®’s commission is roughly only 1.00% of the total sales price. How does it go from 6.00% to 1.00% you ask?
Usually one Realtor® represents the buyer, and one Realtor® represents the seller, so the typical 6.00% commission is sliced into two 3.00% halves. From there, the Realtor® then splits half of the commission with his broker/real estate company, so that 3.00% turns into 1.50%.
But wait — here’s where it gets interesting! Remember that Realtors® are technically contractors, so all of the business they conjure up is paid for by themselves. So now take into consideration other common business expenses such as gas costs to show the property to many buyers, advertising costs to get buyers’ attention if the Realtor® is a seller’s agent, high cell phone bills from constant deal negotiations and other miscellaneous business conversations, and other common expenditures, and a Realtor® probably only makes about 1.00% of the total sales price in commission per deal.
So if you closed a deal where the house sold for $100,000 you’d be looking at an actual profit of roughly $1000.