What Is a Real Estate Agent? How Agents Work and Get Paid

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A real estate agent is a salesperson licensed by a state regulatory board to represent buyers or sellers in real estate transactions. Agents find and market properties, advise on price, negotiate on a client’s behalf, and guide the deal through paperwork to closing. In the U.S., agents are typically paid a commission, a percentage of the final sale price, so their income depends on how many deals they close and how large those deals are. The license generally requires accredited pre-license coursework and a passing score on a state exam, and continuing education keeps it active. In almost every state, an agent cannot operate independently. The agent “hangs” the license with a brokerage run by a licensed broker, who has more training, more experience and a higher-level license, and the brokerage is legally responsible for the agent’s work.

Agents usually specialize in residential property (homes, condos, small multifamily buildings) or commercial property (offices, retail, industrial space). Many residential agents also help with rentals.

Outside the U.S., the role goes by other names, such as “estate agent” in the U.K. and “property agent” in Singapore and Malaysia, but it is the same intermediary role: bringing parties together and helping them agree on terms.

How a Real Estate Agent Works

An agent’s duties depend mainly on which side of the transaction they represent.

Listing agents (seller’s agents) work for the owner. They:

1. Recommend a list price, usually based on recent sales of comparable properties.
2. Suggest repairs, improvements or staging that could raise the price or speed up offers.
3. Market the property through listing services, their professional network and advertising, and arrange showings and open houses.
4. Present offers, advise on counteroffers and negotiate terms.

Listing a property on a multiple listing service (MLS) is one of the main tools a listing agent provides, because it exposes the property to other agents and their buyers.

Buyer’s agents work for the purchaser. They search for properties that fit the buyer’s budget and wish list, schedule and attend tours, and review comparable sales so the buyer can make a realistic offer. They then convey offers, counteroffers and questions between the parties and negotiate on the buyer’s behalf.

Once an offer is accepted, agents on both sides keep working. They help clients with contracts and disclosures, coordinate inspections and appraisals, relay information among lenders, title companies and attorneys, respond to issues before closing, and advise on timelines such as moving dates. They also track market trends, property values, local zoning rules and changes in real estate law.

A buyer’s or seller’s agent may also bring in a co-agent, another licensee who shares the work and the commission on a deal. Showings can be handled by the client’s own agent or, in some brokerages, by an assistant or showing agent who is also licensed.

Interpreting a Real Estate Agent’s Role

The most important question about any agent is whom they represent. An agent representing a client owes that client fiduciary duties, which generally include loyalty, confidentiality, full disclosure and acting in the client’s best interest. Those duties shape how the agent behaves: a seller’s agent is working to get the seller the best price and terms, not the buyer.

When one agent represents both buyer and seller in the same deal, it is called dual agency. Because the agent cannot fully advocate for two parties with opposite goals, state law controls whether dual agency is allowed. Some states prohibit it, and others permit it only with disclosure and written consent from both parties. Agents are required to disclose whom they represent so buyers and sellers can recognize any conflict of interest.

Some states also recognize a “transaction broker” or similar non-agency relationship, in which the licensee facilitates the deal without representing either side as an advocate.

How Real Estate Agents Get Paid

Traditionally, the seller agreed in the listing contract to pay a total commission as a percentage of the sale price. That commission was split between the listing brokerage and the buyer’s brokerage, and each brokerage then split its share with the individual agent under the agent’s agreement with the firm. The agent’s cut depends on that split, and agents usually cover their own costs, such as marketing, licensing fees and transportation.

Pay structures are now more varied. Some brokerages charge a lower percentage on more expensive homes. Others handle the full transaction for a flat fee that can come out below a typical commission. Some offer à la carte pricing, where a seller pays only for specific services, such as placing the property on the MLS or running an open house. Commissions are negotiable; no law sets a standard rate.

The 2024 NAR settlement. On March 15, 2024, the National Association of Realtors announced a settlement of class-action claims brought by home sellers who alleged that its rules inflated commissions. The settlement, worth $418 million, included a ban on offers of buyer-broker compensation in MLS listings and a requirement that buyers working with an agent sign a written agreement with that agent. These practice changes took effect in August 2024. In practice, buyers now negotiate their agent’s compensation more directly, though a seller can still agree to contribute toward it as part of a deal.

Example of a Real Estate Agent’s Commission

The figures below are a hypothetical example to show the mechanics, not typical rates or any firm’s terms.

A seller and buyer close on a home at a sale price of $400,000. Assume:

• The listing agreement sets the listing brokerage’s commission at 2.5% of the sale price.
• The buyer’s written agreement sets the buyer’s brokerage’s compensation at 2.5%, paid by the seller as a negotiated concession.
• The buyer’s agent has a 70/30 split with the brokerage (70% to the agent).

Each brokerage receives: $400,000 × 2.5% = $10,000.

The buyer’s agent receives: $10,000 × 70% = $7,000, before the agent’s own business expenses and taxes.

The seller pays a total of $20,000 in commissions, which is deducted from sale proceeds at closing. If the house had sold for $380,000 instead, each brokerage would receive $9,500 and the buyer’s agent $6,650. A $20,000 price change moves the agent’s pay by only $350, which is one reason commission structures do not always align an agent’s incentives perfectly with a seller’s interest in holding out for a higher price.

Real Estate Agent vs. Real Estate Broker

• Agent: has a basic salesperson license after completing required courses and passing an exam. Usually cannot work alone and must operate under a broker.
• Broker: has completed additional education, holds a broker’s license and, in most states, has a required amount of recent experience as an active agent. Brokers can work independently, and with the appropriate license they can own a firm or franchise and hire agents or other brokers.

Brokers handle the technical side of transactions. A client’s contract is with the brokerage, not the individual agent. In many states, brokers are authorized to manage legal and financial pieces of a deal, such as holding the earnest money deposit and setting up escrow. Agents typically work for brokers and split commissions with them.

There are exceptions. Colorado and New Mexico require every real estate licensee to be licensed as a broker, so the separate “agent” level does not exist there. Every broker is or has been an agent, but not every agent becomes a broker.

Real Estate Agent vs. Realtor

Realtor is a trademarked term for a member of the National Association of Realtors, a trade association. It is a membership, not a license. Agents and brokers can be Realtors, as can property managers, appraisers and other real estate professionals. Realtors must also belong to a state or local real estate association or board and must follow the NAR Code of Ethics, which sets duties to clients, customers, the public and other Realtors.

So every Realtor works in real estate, but not every agent or broker is a Realtor. For scale: there are about three million active real estate licensees in the U.S., about 1.58 million NAR members and about 369,000 real estate brokerage firms.

Real Estate Professional: A Broader Term

“Real estate professional” is a general label for anyone in the industry, including agents, brokers, property managers, appraisers and developers. In U.S. tax law it has a narrower meaning under the passive activity rules: a taxpayer must spend more than half of their working time and more than 750 hours a year in real property trades or businesses in which they materially participate. A license neither guarantees nor is required for that status.

What Real Estate Agents Earn

According to the U.S. Bureau of Labor Statistics, the 2023 median annual pay was $54,300 for real estate sales agents and $63,060 for real estate brokers. Because most income comes from commissions, earnings swing with the housing market and with the number and size of deals closed. Many agents work part-time, and experience varies widely, which widens the spread in pay.

Limitations of a Real Estate Agent

• Scope of expertise. A license does not make an agent an attorney, home inspector, appraiser, tax adviser or lender. Agents can recommend these professionals but should not stand in for them.
• Incentives. Commission pay rewards closing more than holding out for a higher price.
• Conflicts. Dual agency and in-house deals within the same brokerage can reduce how strongly one side is represented.
• Uneven quality. The license sets only a minimum standard, and experience and market knowledge vary widely.
• Cost. Commissions are often one of the largest closing costs for a seller, and buyers may now pay their own agent directly.

The Bottom Line

Before hiring an agent, pin down whom the agent represents, how and by whom they will be paid, and whether dual agency or another non-advocate relationship could apply to the deal.

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