How Do Real Estate Agents and Brokers Get Paid?

When a property is listed on a multiple listing service (MLS), there may be six individuals involved:

1. The Seller
2. The Listing Broker (Represents Seller)
3. The Listing Agent (Agent who works for the Listing Broker)
4. The Buyer
5. The Selling Broker (Broker who represents Buyer)
6. The Buyer’s Agent (Agent who works for the Selling (Buyer’s) Broker)

When the seller successfully closes on the sale, the Listing Broker is entitled to the commission specified in the listing agreement. In the St. Louis area, this is typically around 6% of purchase price. The seller is generally responsible for paying this at closing.

The Listing Broker shares the commission with the Selling Broker, and each Broker pays their own agents.

For example, assume a home purchase price of $500,000. The 6% commission would be $30,000. The Listing Broker distributes half, or $15,000, to the Selling Broker. Then the Listing Broker pays their Listing Agent. Percentages vary depending on the brokerage, but for simplicity sake, let’s say they split it. The Listing Broker takes $7,500 and pays the Listing Agent $7,500.

The Selling Broker also pays their agent. Again for simplicity, let’s assume they split the $15,000, each taking $7,500.

At the end of the day, on a $500,000 home purchase, the typical compensation breakdown would look like:
• Listing Broker: $7,500
• Listing Agent: $7,500
• Selling Broker: $7,500
• Selling Agent: $7,500

Who pays the commission? All states have different practices, but in Missouri, commissions for both sellers and buyers agents/brokers are typically the responsibility of the Seller. The Buyer pays nothing to their agent/broker.

This sets up a bizarre dynamic for the Buyer’s agents/brokers, who are actually getting paid by the other side (the Seller). If you are on the buying side, beware of this potential conflict between you and your agent/broker. You are not the one paying their bill.

If you have questions about your situation, whether you are buying or selling a property, please feel free to contact our office through this website or at 314.862.2237

 

THE CHOICE OF A LAWYER IS AN IMPORTANT DECISION AND SHOULD NOT BE BASED SOLELY UPON ADVERTISEMENTS. Information provided on this website is for informational purposes only, and should not be construed as legal advice. Transmission of information from this website or via internet email from this website does not create an attorney-client relationship, nor is it intended to create such a relationship. Links to sites maintained by third parties are for your convenience, but those sites are not endorsed by this law firm. The Jacob Law Firm, LLC also does business as Home Sweet Legal.