How is a real estate agent typically compensated?

A real estate agent is typically compensated through commission, which is a percentage of the sale price of a property that is paid to the agent upon the successful closing of a transaction. This commission-based compensation structure incentivizes agents to achieve the best possible sale outcome for their clients, as their earnings are directly tied to the value of the property sold. Commissions also allow for flexibility in earnings, as agents can potentially earn more by closing higher-value transactions or by selling more properties.

In contrast, other compensation methods such as salary or bonuses are not commonly associated with the standard practice in real estate brokerage, where agents usually operate as independent contractors rather than employees, relegating these forms of compensation to less common scenarios. Equity in property is also not a standard compensation method in real estate transactions. It is primarily a financial interest in a property, not a form of payment for services rendered. This makes commission the most logical and prevalent method of compensation for real estate agents.