A real estate commission is a fee paid to agents or brokers for facilitating a property transaction. Calculated as a percentage of the final sale price, this commission compensates agents for services such as marketing, negotiating, coordinating showings, and managing paperwork, aligning their incentives with successful sales.
Commission rates typically range between 5% and 6% of the sale price, though they can vary by location, agent, or brokerage type. Sellers generally pay the commission, which is factored into the listing price and split between the listing agent and the buyer’s agent as defined in the listing agreement.
| Sale Price | Commission Rate | Total Commission | Commission Split |
|---|---|---|---|
| $300,000 | 5% | $15,000 | Each agent gets $7,500 |
| $500,000 | 6% | $30,000 | Listing Agent: $15,000; Buyer’s Agent: $15,000 |
| $500,000 | 4.5% (discount brokerage) | $22,500 | Listing Agent: $7,500; Buyer’s Agent: $15,000 |
| $400,000 | 3%–6% | $12,000–$24,000 | Varies by rate charged |
For example, a traditional 6% commission on a $500,000 sale yields $30,000 total, split evenly. Discount brokerages might offer a 1.5% listing fee plus a 3% buyer’s agent fee, totaling 4.5% or $22,500, which can save sellers money.
Commissions are paid after closing, meaning agents earn only upon a successful sale. This structure motivates agents to negotiate the best possible deal and see transactions through to completion.
Real estate commissions compensate agents for their expertise and time, ensuring professional management of complex transactions. However, commission structures have faced legal scrutiny—for instance, a 2023 antitrust lawsuit against the National Association of Realtors alleged artificially inflated fees, which may drive future changes in industry standards.
In real estate, a commission is a seller-paid percentage of a home’s sale price—usually 5% to 6%—split between listing and buyer’s agents. It incentivizes agents to market properties effectively, negotiate deals, and manage transaction details until closing.
