A lot of money moves around in the property market. Houses sell for hundreds of thousands and millions of dollars. It’s not surprising, then, that agents in the US make an annual base salary of over $96,000, a relatively high sum compared to other professions.
Realtors are typically paid via commission rates. In other words, they take a percentage of the real estate transactions as their service fee. As a result, the higher the cost of the property, the higher the fee the agent receives.
For this reason, many agents target million dollar homes. That begs the question of how much does a realtor make on a million dollar sale? The answer isn’t all straightforward, as many factors are in play.
At Icons Of Real Estate, we’ve been in business with many real estate agents and brokerage companies that sell million dollar homes. So, in this post, we’ll break down what such a sale entails and how much commission realtors take.
Understanding Real Estate Agent Commissions
To capture how much agents make on a million dollar house, it helps to first comprehend how commission rates work.
Listing and Buyer’s Agent Split
A typical real estate sale will involve two types of agents: the listing agent and the buyer agent. As the name suggests, the buyer’s agent works with the buyer; meanwhile, the listing agent is from the seller. Both get a commission, irrespective of the property cost.
The listing agent is responsible for making the sale public. They display it on websites and multiple listing services to attract potential buyers. So, the work they do is critical.
On the other hand, the buyer’s agent helps clients find suitable homes to buy. This can be difficult for properties costing over a million dollars as not many are available. So, the buyer’s agents are critical too.
The typical realtor commission in the United States is between 5% and 6%. Most often than not, the two agents in the transaction take an equal share. In other words, they get 2.5% or 3%, depending on the commission rate.
However, the agents will likely not go home with the entire commission. If they work with a brokerage firm – usually the norm – the firm will also get a share of the commission rate. The exact percentage they’ll take depends on many factors, especially the realtor's experience.
Notably, high-performing agents who always hit targets will pay lower commission rates to their brokerages. If you’re a realtor and want to become such a high performer, you can leverage quality real estate podcasts network, webinars, and events.
Calculating the Realtor Commission on $1 Million Dollar Home
Let’s take a practical example by calculating the commission for a million dollar house. Going with the 6% figure, we have:
6% * 1,000,000 = 60,000.
That implies the commission amount from a million dollar real estate sale will be $60,000. Now, if the buyer and listing agents share the commission equally, each will receive $30,000. If it’s an independent agent, then, they’ll walk away with all $30,000. However, if the agent is affiliated with a brokerage, they take the money to the company for further division.
The brokerage firm usually takes a higher commission than the agent. Suppose it’s a 60:40 ratio. Hence, the brokerage will receive $18,000 from the $30,000, while the agent gets $12,000.
Technically, both the buyer and seller pay the commission. In a million dollar house sale, for instance, the buyer pays $1,000,000. Yet, the seller won’t receive the total amount. They’ll receive $940,000 instead.
However, a million-dollar real estate transaction won’t necessarily follow the average 5 to 6% commission rate. The sharing pattern between the buyer’s and listing agent, and agent and brokerage, also varies.
How Real Estate Commission Rates Are Determined
Realtors don’t just fix any commission percent they prefer. They consider several criteria, including house value, location, agent experience, and services the agent offers. Above all, home value takes precedence.
Suppose an agent charges 5% for a $500,000 house and a $1 million one, respectively. The percentage is the same, but the amount of the latter will be higher. So, it’s unsurprising if the $1 million house allows a slightly lower percentage.
Agent experience is critical, too, since reputed professionals will charge more. By extension, the more services the agent offers, the higher their commission will be. With these in mind, you can understand the answer to the question of how much commission for selling a million dollar house will vary for different agents.
What Is a Realtor's Commission on a Million Dollar Home?
Several factors affect the commission percent of homes that cost up to a million dollars. The experience isn’t the same as selling an average house. As a matter of fact, agents face challenges when selling such big-budget properties. Let’s discuss these challenges.
Challenges Agents Face When Selling a Million Dollar House
The first problem with selling million dollar homes is the low number of potential buyers. Only a few people can afford to pay such a high amount for a property. So, the target clients are usually wealthy people.
Since the client pool is small, finding prospective buyers becomes arduous for real estate agents. For this reason, million dollar homes spend more time in the market. Agents will need to up their marketing game to land a buyer.
Furthermore, any interested buyer will have high expectations of the property. They’ll be more demanding, they’ll have more preferences, and they’ll ask more questions. It’s logical, considering they’re going to spend seven figures.
Therefore, real estate agents need to ensure the house is almost flawless. Even the smallest downsides can deter prospective buyers. This is especially true because there are other luxury properties the buyer can consider.
Opportunities of Selling a Million-Dollar Home
Finding potential buyers for a million dollar home isn’t all stress for real estate agents. It comes with many opportunities, too. In particular, opportunities to earn better.
There’s usually more room for negotiation when selling a high-priced property. Realtors can unleash their skills’ arsenal and request a higher commission depending on the market conditions. For example, since expensive properties take time to sell, agents will work on the listing for longer. It’s only normal that they get paid more.
Also, it’s not an easy feat to market and successfully close a deal for a million-dollar property. Only an experienced real estate agent can pull it off, and brokerages will set higher commission rates for such agents. In addition, some sellers will reward a higher commission if they can sell their property faster at a fair price.
So, to answer the question of “how much does a realtor make on a million dollar sale,” it’s usually higher than the average. The commission may not necessarily be above the 5% to 6% average. However, the amount will be noteworthy since $1,00,000 is a lot of money.
Ultimately, it depends on the market conditions, the agreement between agents and clients, and the brokerage company. For example, an agent may charge a high commission of 8% but still end up with less after splitting.
Which States Have The Highest Real Estate Commission
We’ve established that the average realtor commission is between 5% to 6%. It’s essential, however, to also pinpoint that the rate may differ significantly for real estate agents in different US cities. To put it simply, some states have higher commission rates than others.
Let’s look at the states at the top of the ladder — using data from Bankrate — so you get a picture of how much residential agents make on a 1 million dollar sale.
Ohio
The average realtor commission in Ohio is 5.81%. Consequently, the Midwestern state has the highest median realtor average commission rate in the country. On a million dollar sale, then, agents in Ohio will typically make around $58,100. If the money is split between the listing and seller agent equally, that means $29,050 for each professional.
Colorado
Colorado ranks number 18th on the list of states with the highest average commission rate in the United States. Realtors in the state make 5.52% on average. For comparison, directly above Colorado is Pennsylvania at 5.53%, and below is Alabama is 5.44%. With an average of 5.52%, Colorado agents could make up to $55,200 on a $1,00,000 sale.
Washington
The state housing the White House carries a relatively moderate average real estate commission. At 5.30%, Washington real estate agents receive higher than agents in Illinois but lower than those in Wyoming. Subsequently, a transaction of up to a million dollars would mean $53,000 in commissions.
Nevada
Nevada real estate agents receive a commission rate of 5.02% on average. That puts the state at 44 on the list, just above Alaska with 4.99% and below Maryland with 5.11%. If a Nevada listing and seller agent completes a one million dollar sale, they could take home around $25,100 each from the full $50,200 commission.
New York
New York City, the NYC, is famed for having a relatively high real estate commission rate — perhaps the highest in the developed world even. However, joining the capital with other cities that make up the state of New York, the commission reduces to 4.97%. Therefore, on average, real estate agents in the state of New York make $49,700 on a million dollar purchase.
Conclusion
Home sellers and upcoming agents often ask how much does a realtor make on a million dollar sale. The answer, as explained in this post, depends on certain factors. However, the amount should be more than what agents make on average-priced homes.
Knowing the commission you’ll pay to sell your million-dollar property is important if you're a home seller. What’s more important is choosing an agent who understands the market. That’s the only way you can sell a luxury home effectively.
At Icons of Real Estate, we work with top-performing real estate agents across the USA and Canada. Our mission is to empower real estate professionals like you to reach unprecedented levels of success and become industry icons. Curious to learn how we can achieve this together? Schedule a consultation with our team of experts today and get ready to watch your sales grow!
Frequently Asked Questions
Some realtors make as high as $192,000 per year. That’s about $100,000 more than what real estate agents in the United States earn on average. No actual data dictates the amount the top 1% of realtors make. However, the value is estimated to be over $450,000 per year.
Some real estate agents that work with brokerage firms get paid monthly with a salary model. However, the vast majority of agents don’t take salaries. Instead, they get paid via commission rates whenever they close a deal.
Agents in the US make an average of around $96,500 each year. So, per month, the amount is around $8,000.
The commission for homes costing up to 10 million dollars will range from $500,000 to $600,000. However, some deals are rare because homes hardly cost up to ten million dollars.