Are you looking to get into real estate in Texas but wondering how much you'll earn as an agent? What will your commission check be when you close your first deal? The amount you end up taking home depends on several factors. Read on to learn all you need to know about real estate commissions in Texas.
What Is the Commission for Real Estate Agents in Texas?
The commission you'll earn as a real estate agent in Texas can vary. Traditionally, it will be a cut of a percentage that is split four ways. Here's more on how it works.
How Traditional Commission Splits Work
Traditional commission splits break down as follows:
- First, the commission amount for the transaction is determined between the seller of the property and the listing agent. Once they agree on an amount, it will be included in the listing agreement.
- Next, the listing agent offers a percentage to a broker who will find a buyer.
- Then, the brokerage agrees to pay the buyer's real estate agent (you) a percentage of the commission.
- The listing agent also often has a broker with whom they need to split their commission.
As a result, the commission for the sale often goes four ways. One important factor to keep in mind is that all of these splits are negotiable.
Commission Split Example
Let's look at an example. Say a home is listed for $300,000 and the seller and listing agent agree on a 6% commission. When the home sells, $18,000 will go towards paying commissions. If the listing agent and broker decide on a 50/50 split, each would get $9,000. Then, if the broker and real estate agent agree on a 50/50 split, they would each get $4,500. The same goes for the listing agent and their broker. In the end, four parties would get $4,500.
- Home sale price: $300,000
- Commission (6%): $18,000
- Listing broker's commission (1.5%): $4,500
- Listing agent's commission (1.5%): $4,500
- Buying broker's commission (1.5%): $4,500
- Buying agent's commission (1.5%): $4,500
Note: There are no uniform commission rates in real estate. In fact, it's currently a violation of federal antitrust laws to try to impose them. However, according to List With Clever's 2021 survey, Texas has an average commission rate of 5.65%
Breaking Commission Tradition
Some companies have cropped up that are breaking tradition. For example, RedFin offers to list properties for a 1.5% commission fee. They act as a listing brokerage and listing agent but charge the rate of just one of those parties. Being so, it usually ends up costing only half of what the traditional model costs.
However, the commission for the buyer's broker and the agent is typically the same. So if you bring a buyer to a RedFin property, as the real estate agent, you can still earn your normal commission. While this can save the buyer and/or seller on potential costs, some customers do complain about poor service quality with RedFin.
Does the Buyer or Seller Pay the Commission?
When the home sells, the seller will typically pay the commission unless they have otherwise negotiated to split it with the buyer. However, the commission is often factored into the selling price of the home. Being so, it can be argued that the buyer actually pays some, if not all, of it.
Get Your Real Estate License in Texas
Real estate agents in Texas earn an average income of $88,688 per year, according to 2021 data from Indeed. However, those with over 10 years of experience average around $104,000 annually. Plus, you get other benefits like the ability to work from home, have a flexible schedule, and get professional development assistance from your broker. Ready to get selling? Start the process of getting your license online!