PHOTO: Real Estate Agents

Real estate agents are paid on commission. The median gross income earned by real estate agents and brokers was $39,800 in 2017, according to the National Association of Realtors. The main source of that income is commissions on real estate sales. If you’re buying a home, it’s important to understand how any agents you work with earn their commission. If you want more holistic insight into how commissions could reduce your real estate earnings and what that means for your overall financial picture, consider consulting a financial advisor.

Most often commissions are figured as a percentage of the property sale price. A common commission percentage is 6%. So on a $200,000 home, the commission would equal $12,000.

Not all deals pay a 6% commission. Real estate professionals specializing in commercial property transactions may command up to 10%. Discount residential real estate brokerages may ask for significantly lower commissions. Some offer standard commissions as low as 1%.

Sales commissions are always negotiable, at least in principle. Some agents and brokers may not be willing to negotiate. The amount of the sales commission will be spelled out in the listing agreement. This is an agreement between the seller and the listing agent regarding the marketing and sale of the home.

Sales commissions also vary by location. Some regions charge lower commissions than others. And sometimes a real estate professional may work for a flat fee.