The simplest answer here is “Out of the transaction at closing”. It is a commission based on the sales price of the home. This allows home buyers and sellers to have their agents working for them for no up-front or hourly costs.
In the past few years more “discount” or “flat fee” services have become available. These services have significant downsides that buyers or sellers should carefully evaluate before signing up.
The vast majority of sellers still sign listing agreements with companies that have a commission rate structure. Listing agreements are generally between 4-7% of the sales price of the home. At closing, about half of that typically goes to the company that “lists”, (or markets) the property, and the other half goes the buyer’s agent’s company. Individual agents will get a split of that.
Example: If a listing sells for $100,000 and is listed for 6% and split evenly, the seller agent company will make $3,000 and the buyer agent company will make $3,000 at closing. At $500,000, the seller’s agent company will make $15,0000 and the buyer’s agent company will make $15,000. The agent will get a portion of that. So, A $500 sale will net out $470,000 to the seller minus his/her closing costs.
Agent commissions vary across the country and between agencies, so consumers are encouraged to ask the simple question, “How do you get paid?” when interviewing agents.
Agent commissions can be a significant amount, so both buyers and sellers are advised to carefully look at what the agent will do for them. Anyone buying or selling real estate should interview at least two agents.