The average commission rate real estate agents in the Chicago area is 5% of the selling price of a home. This is paid by the seller at the time of closing. The listing agent, who represents the seller, agrees to split the commission, usually half and half, with the buyer's agent.
Thus, each side of the transaction gets 2.5% . Then, each agent shares the commission with his or her brokerage firm, according to the agreement each of them has with the firm. Some top agents may keep all of their commission (however, they usually pay a hefty monthly fee to their company), but more likely 80%, while the brokerage gets 20%. New agents usually split the commission 50/50 with their brokerage. However, some companies charge the agents as much at 65%, especially if they support the agent with sophisticated lead-generation services.
On average, here is how much money the agent gets to keep (based of $500,000 home sale):
Total commission paid by the seller: $500,000 x 5% = $25,000
Commission per side: $25,000/2 OR $500,000 x 2.5% = $12,500
Agent's net commission: $12,500 x 80% = $10,000
Agent's net commission: $12,500 x 50% = $6,250
For each transaction, the agent also incurs certain expenses. For example, a listing (seller's) agent will pay for all marketing and advertising for the property, which can run into hundreds of dollars, and open house expenses. A buyer's agent may incur transportation costs, parking and meal costs. And, since agents are independent contractors, they owe a significant portion of their earnings to Uncle Sam.
To net a million dollars (pre-tax), a top producing agent has to sell 100 half-million-dollar homes. The vast majority of agents are not top-producing, and are lucky if they sell two homes a month.
There you have it.