How Brokers Earn Their Commissions

Brokerage Law

Buying and selling real estate is serious business. So is the money that can be made on real estate transactions. Knowing how real estate brokers and agents make their money is an important issue for both real estate buyers and sellers.


Because understanding commissions can help buyers to make informed offers, and reducing the commission by even one percent can put a lot more money in a seller’s pocket.

In today’s post we are going to take a brief look at how brokers earn their commissions.

Agents, Brokers, Salespersons – Whose Who?

Before we look at real estate commissions, we should first discuss the various individuals involved in real estate transactions. Typically, in a home purchase situation, there is a real estate agent and a real estate broker.

Real estate agents can be working for the buyer (“buyer’s agent”) or for the seller (“seller’s agent”). Less frequently, but allowed in some cases, one agent can work for both the buyer and the seller (“dual agent”).

So what’s the difference between agents and brokers? Both real estate agents and brokers must be licensed. The examination that brokers must pass is more difficult than the one agents take. However, that does not mean that brokers necessarily know more than agents. Agents work for brokers.  Agents are licensed to sell real estate, but they are not allowed to work independently.  They must work with a broker who oversees the agents.

Some brokers work directly with home buyers and sellers; others work for real estate companies or franchises or have a staff of agents who work directly with the buyers and sellers.

Ok, so now we know who the players are. But how do they earn their commissions?

Brokers Commissions and Procuring Cause

In Georgia, in a standard home purchase situation, a broker typically earns a commission when, during the agency, the broker finds a buyer who is ready, able, and willing to buy the property on the terms stipulated by, or acceptable to, the seller.  Historically, brokers worked for sellers, not buyers. However, Georgia has recently seen a growth in “buyer’s brokers.” This means that if the buyer contracts with a broker, that broker (“buyer’s broker”) earns a commission by locating a seller ready, willing, and able to sell on the terms specified by the buyer.

Commissions for a real estate transaction are negotiable. However, they tend to range anywhere from 1% to 10%. Typical real estate commissions tend to be around 5-6%.

As between brokers and the agents that work for them, it is common for a broker and an agent to split the commission. Of course, this all depends on what is allowed by state law and the agreement between the broker and the agent, but when a commission is split, a portion of it goes to the broker and the rest goes to the agent.

Of course, there is far more to know about brokerage fees and commissions than we can cover in one simple post here, so if you need help, contact us.

We Know Georgia Real Estate Law

If you have questions about broker’s fees or real estate transactions, contact us.  We are experienced real estate attorneys in Georgia. Our practice focuses only on real estate issues and litigation; which means we practice in one area of law, and we do it extremely well. To schedule your free phone consultation, call us at: 770-888-7707.

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