How Real Estate Commissions Work
Commission Rate: The commission rate is typically negotiated upfront when a seller contracts with a real estate agent. This rate commonly ranges from 5% to 6% of the home’s sale price, though it can vary based on the region and transaction specifics. For instance, if a home sells for $500,000 and the commission rate is 5%, the total commission would be $25,000.
Split Between Agents: The total commission is generally split between the listing agent (who represents the seller) and the buyer’s agent (who represents the buyer). A common split is 50/50, though this can be negotiated differently. Using the previous example, if the commission is $25,000, each agent might receive $12,500.
Services Provided by Agents:
- Listing Agent: Assists the seller in setting a price, marketing the property, arranging showings, negotiating offers, and handling paperwork and closing details.
- Buyer’s Agent: Helps the buyer find a home, negotiate the purchase price, arrange inspections, and manage the closing process.
Who Pays the Commission? The commission is typically paid by the seller out of the proceeds from the sale of the home. This amount is deducted from the sale price at closing. While the seller pays the commission, it is often factored into the listing price of the home, meaning the buyer indirectly contributes through the purchase price.
Commission Agreements: The agreement regarding the commission is detailed in the listing agreement, a contract between the seller and the listing agent’s brokerage. The commission terms for the buyer’s agent are outlined in the Multiple Listing Service (MLS) and are agreed upon when the buyer’s agent accepts the listing.
Variable Commissions: In some cases, agents may agree to a variable commission structure where the rate changes based on specific conditions, such as selling the home within a certain timeframe or achieving a specific sale price.
- Sale Price: $1,000,000
- Commission Rate: 5%
- Total Commission: $500,000 * 5% = $50,000
- Split Between Agents: $50,000 / 2 = $25,000 each for the listing agent and the buyer’s agent.
*Please note at Zown we only charge a flat fee of $8,999 to List the property + Buyer's Broker's Commission