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June 2, 2022

How Real Estate Agents Get Paid in San Francisco

I’m often contacted by prospective buyers and sellers who eventually ask how payment and commissions work in San Francisco. So I thought I’d give you the bottom line as to how real estate agents get paid.

Homeowners who list their San Francisco properties typically agree to pay commission to the brokers (e.g., the companies affiliated with each agent) who represent the seller and the buyer. The listing agent negotiates the total commission up front, and this is included in the seller paperwork.

Total commissions for both brokers range from five- to six percent, and are typically divided equally. For example, a five percent commission on a $1,000,000 condo would find the seller paying 2.5% to each side—$50,000 in commissions, with the brokers each receiving $25,000.

The broker then pays the real estate agent according to whatever split is set by the broker. Splits range from 50% to around 90%, and are based upon how much money the agent is earning. The more money the agent earns, the more favorable the split.

Home buyers aren’t directly responsible for paying real estate agents a fee. An agent who represents a buyer doesn’t get paid until the buyer actually purchases a property.

It’s worth noting that real estate can be conducted in various ways from state to state, and it’s definitely done differently among countries. I can only speak to San Francisco; we have many great agents in this city who go above and beyond when it comes to clients service levels. (If you’d like more detail, contact me and I’ll send you my list of services for both the buyer and seller sides.) For example, attorneys do all the contract work in some cities, and certain countries don’t have what we consider to be buyer agents in San Francisco.

Real estate agents here are never guaranteed a paycheck. There are times when sellers decide to withdraw a property from the market after their agent has spent time and money marketing the home for several weeks or months, and there are buyers who can house hunt and write offers for months or even years before they actually purchase a property.

In the meantime, agents are responsible for covering their own cost of living (including medical insurance), as well as substantial fees for association and transaction fees, marketing costs, and annual broker service fees/insurance that can be as high as $5,000/year. And oh, yeah—we have to pay taxes on our income, too. That big check you think your Realtor is getting? He or she will end up walking away with a fraction of that money.

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