When thinking of starting a career in real estate, its potential for high profits is common. Most people think realtors make a fortune from every home sale, particularly when properties sell for $400,000 or more. The truth about a realtor’s earnings from a $400,000 sale tells a different story.

A realtor’s commission doesn’t go straight into their pocket. Their actual earnings come from a complex mix of broker splits, shared fees between agents, and business costs. The percentage realtors make depends on several moving parts within the commission structure.

This detailed guide shows the exact commission realtors earn per sale. You’ll learn about current market commission rates and the key factors that determine a real estate agent’s final paycheck from a $400,000 home sale.

Understanding the $400,000 Commission Breakdown

Let’s look at how real estate professionals earn their compensation through a $400,000 home sale commission structure.

Traditional 5-6% commission structure

Real estate agents have earned commissions between 5-6% of the property’s sale price. A $400,000 home sale with a 5% commission rate results in a $20,000 commission. The seller pays this commission, which gets split between the buyer’s and seller’s agents.

Effect of 2024 NAR settlement changes

The August 2024 NAR settlement has changed the commission structure. Real estate agents need written agreements with buyers before they show properties. These agreements must specify:

• The specific compensation rate or amount
• A statement that fees are negotiable
• Prohibition on receiving compensation exceeding the agreed amount

Sample calculations at different commission rates

The national average commission rate stands at 5.32%, though rates vary by location and market conditions. Here’s what different commission rates mean for a $400,000 sale:

Commission Rate Total Commission Agent Split (2.66% each) 5.32% (Average) $21,280 $10,640 5% $20,000 $10,000 4.5% $18,000 $9,000 The agent’s actual take-home pay is lower than these figures because of broker splits and business expenses.

How Commission Splits Work

Real estate commission splits work through a well-laid-out system that controls money distribution among all parties in a transaction.

Listing agent vs buyer’s agent split

Property sale commissions are usually split equally between the listing agent’s brokerage and buyer’s agent’s brokerage. A $400,000 home sale with a 5.8% commission ($23,200) would give each brokerage $11,600.

Broker-agent split arrangements

Agents must share their portion with their brokers after the brokerages divide the commission. Common arrangements include:

• 50/50 split: Equal division between broker and agent
• 60/40 split: Agent receives 60% ($6,960 in our example)
• 70/30 split: Experienced agents often earn 70% ($8,120 in our example)

Take-home pay for agents

Agent’s final earnings depend on their broker agreement and experience level. Here’s a typical breakdown for a $400,000 sale:

Split Type Gross Commission Broker’s Share Agent’s Take-Home 50/50 $11,600 $5,800 $5,800 60/40 $11,600 $4,640 $6,960 70/30 $11,600 $3,480 $8,120 Experienced agents can negotiate 100% commission deals and keep all commissions. They pay a monthly “desk fee” to their brokerage. These agents become responsible for their marketing expenses and operational costs.

Buyer’s agent compensation has changed due to the recent NAR settlement. Buyers now negotiate fees directly with their agents instead of splitting them through the listing brokerage.

Related: How Much Does a Realtor Make on a $500,000 Sale?

Additional Costs and Deductions

Real estate professionals face many expenses that affect their actual earnings from a $400,000 sale. Their take-home pay is substantially different from the gross commission amount. These costs paint a clearer picture of an agent’s actual income.

Marketing and business expenses

Real estate agents spend approximately $5,330 each year on business expenses. The typical marketing costs include:

• Professional photography and virtual tours
• Yard signs ($50-85 each) and business cards ($50 per 1,000)
• Website maintenance ($60 annually)
• Continuing education ($500+ yearly)

Tax implications and self-employment costs

Real estate agents must pay self-employment tax at 15.3% of their net earnings as independent contractors. This rate includes both employer and employee portions of Social Security and Medicare taxes. The agents can deduct these business expenses:

• Marketing and advertising costs
• Vehicle expenses and mileage
• Home office or desk rental fees
• Professional association dues

Transaction-related fees

Brokerages charge transaction or administrative fees between $295 and $625 per transaction. These additional costs affect an agent’s earnings and help cover:

• Document processing costs
• Regulatory compliance requirements
• Errors and omissions insurance ($30-60 monthly)
• Multiple listing service (MLS) dues

Brokerages often charge these transaction fees separately from commission splits. This practice further reduces an agent’s final earnings from a $400,000 sale.

Factors Affecting Commission Rates

A realtor’s earnings from a $400,000 sale depend on several factors. Commission rates change based on market conditions, how experienced the agent is, and where the property is located.

Market conditions and property type

The current state of the real estate market substantially affects commission rates. Agents might be more flexible with their rates in a seller’s market where properties sell quickly. The opposite happens in a buyer’s market, where agents tend to keep higher rates because they spend more time and money on marketing. Properties that need special expertise can command higher commission rates.

Agent experience and brokerage brand

An agent’s experience level makes a huge difference in their earning potential. Research shows that veteran agents (10+ years experience) get about 2% more for properties and close deals 32% faster than their less experienced colleagues. Properties listed by new agents (less than 2 years experience) sell for 10% less and stay on the market much longer.

The effect of a brokerage’s brand varies by location:

• Agents at large national brands complete 30% higher transaction volumes
• Local market leaders can still dominate despite competition from national firms
• In some metropolitan areas, four major brands handle 64% of all sales

Geographic location and local trends

Location and local market dynamics create substantial differences in commission rates. Here’s what you can expect:

Market Type Typical Commission Range Factors Affecting Rate Urban Centers 4-5% Higher competition Rural Areas Up to 7% Fewer transactions Luxury Markets 5-6% Higher property values The recent NAR settlement has started to change commission structures in different markets. Areas with low inventory and high demand see stable commission rates, while more competitive markets show greater flexibility in rates.

How Much Does a Realtor Make on a $400,000 Sale Frequently Asked Questions

What percentage do most realtors take?

Most realtors take around 5% to 6% of the sale price as their commission, though this can vary depending on the region, market conditions, and individual agreements. Typically, the total commission is split between the buyer’s agent and the seller’s agent. For example, a 6% commission might be divided 3% to each agent, but these splits can be negotiable.

What percentage do most real estate agents charge?

Most real estate agents charge between 5% and 6% in commission, which is generally split between the buyer’s and seller’s agents. This fee is based on the final sale price of the property, and while it is negotiable, this range is considered standard in many markets. Some agents may offer lower commissions in certain competitive markets or for higher-end properties.

Is 6% a lot for a real estate agent?

A 6% commission for a real estate agent is considered the standard in many regions, though it might be seen as high depending on the market or the specific services provided. While 6% may seem significant, it’s important to consider that the commission is typically split between the buyer’s agent and the seller’s agent, and agents also have to cover their own business expenses. Some agents may negotiate a lower percentage, particularly in more competitive or high-priced markets.

What is a typical realtor split?

A typical realtor split refers to how the commission from a property sale is divided between the listing agent (seller’s agent) and the buyer’s agent. In most cases, the commission is split evenly, meaning each agent receives 3% if the total commission is 6%. However, splits can vary depending on the agreement between agents and the brokerage they work for, with some agents keeping a higher percentage if they are experienced or work independently.

Is it hard to make 100k as a real estate agent?

Making $100,000 as a real estate agent is possible but can be challenging, especially in the early years of a career. Success in real estate depends on factors like location, the agent’s network, and the number of transactions they complete. Agents who are proactive, work in high-value markets, and have a solid client base are more likely to reach this income level, but it requires hard work, experience, and persistence.

How many real estate agents make $1 million a year?

Only a small percentage of real estate agents make $1 million a year, typically those who work in high-end markets, close many high-value transactions, or have substantial experience and client networks. Estimates suggest that less than 1% of real estate agents achieve this income level. Those who do often have a significant number of deals and strong relationships with affluent clients.

Do realtors pay taxes on commission?

Yes, realtors must pay taxes on their commission income, just like any other self-employed individual. The commission they earn is considered income, and realtors are required to pay federal, state, and possibly local taxes on that income. Additionally, realtors must pay self-employment taxes, which cover Social Security and Medicare contributions, unless they are employed by a brokerage and receive a salary.

What percentage of realtors make 100k?

The percentage of realtors who make $100,000 annually varies based on factors like location and experience. Nationally, only about 10% to 20% of real estate agents make $100,000 or more per year. Many new agents start out earning significantly less until they build a client base and gain more experience in the industry.

How do buyers agents get paid now?

Buyer’s agents are typically paid through a commission that is shared with the seller’s agent. In most cases, the commission is included in the sale price of the home and split 50/50 between the two agents. In some cases, buyers may negotiate a buyer’s agent fee if the seller’s agent does not offer sufficient compensation, but this practice can vary by market.

How to determine realtor commission?

Realtor commissions are generally determined by the seller of the property and are often negotiable. The commission is usually a percentage of the sale price, with 5% to 6% being the most common range. The commission rate can vary depending on the market, the specific services the realtor provides, and the agreement between the realtor and the client.

How much should I set aside for taxes as a real estate agent?

As a real estate agent, it’s recommended to set aside around 25% to 30% of your income for taxes, as you are considered self-employed. This amount will cover federal income taxes, state taxes (if applicable), and self-employment taxes. It’s important to consult with a tax professional to determine the exact amount you should set aside, as tax rates can vary based on income level and location.