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What Is ‘Commission’ in Real Estate? PART 1
Dated: January 26 2023
Views: 34
Real estate commissions can be confusing.
With so many dependencies and variations, it's no surprise that people ask questions like, "Who pays? How is it determined? "How much exactly does it cost?"
Many people, including those who have bought or sold real estate through real estate brokers, have no idea how real estate commissions work, how they're calculated, or what the commission pays for.
Part one of our Real Estate Commission series will explain real estate commissions in layman's terms.
We'll also reveal how a real estate agent's commission is determined, calculated, and used.
A real estate commission is a professional service fee charged by a real estate agent for the purchase or sale of a home.
The price covers the successful transfer of real property from one party to another.
The fee is typically a pre-negotiated percentage of the property's selling price and is paid to the listing broker by the seller.
However, some real estate brokers demand a flat fee commission instead.
These kind of charges are becoming more frequent as there are no restrictions on what agents can charge—and many agents find inventive methods to differentiate themselves.
What commission percentage do most real estate agents charge?
Most real estate agents charge between 5 and 6 percent, however the average is closer to 6.
The average real estate agent commission rate in 2021 was 5.49% (about 2.75% per side). Of course, the precise percentage fluctuates from sale to sale.
A few realtors charge flat prices for their services, meaning no percentage at all.
However, it is often 5 to 6% across the board. Here are a couple such examples:
- If a house sells for $400,000, a 6% commission equals $24,000.
- Similarly, if the sale price of a home is $200,000, a 6% commission equals $12,000.
It's also worth noting that real estate commissions are typically split between two agents:
- The listing representative (the agent who represents the person selling the home)
- The buyer's representative (the agent who represents the person buying the home)
Danielle Sharp
Full time REALTOR since 2002, I moved from the Detroit area to SWFL in 2007. Since 2011 I have been the broker/owner of Sharp Homes Realty, a small boutique brokerage based out of Cape Coral. We are f....
1 comments in this topic
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This would not be our choice for Florida. For sure never pay $150. Paulette
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