Real Estate Commission Explained

How commission is structured

Real-estate commission is a percentage of the final sale price, paid at closing out of the seller's proceeds. It's set in the listing agreement between the seller and the listing brokerage. The dollar amount is split — sometimes evenly, sometimes not — between the listing brokerage and (if the seller chooses to offer compensation) the buyer's brokerage. Each brokerage then pays its individual agent under their internal split.

Typical combined rates fall in the mid-single digits as a percentage of sale price, but the actual number varies by market, by price point, and by what the seller and brokerage agree to. There is no "standard" commission. Antitrust law prohibits the industry from setting one.

What recently changed

Following industry-wide legal settlements, two practices changed materially:

• Buyer-agent compensation is no longer offered on the MLS. What the seller is willing to pay the buyer's brokerage (if anything) is now negotiated in the purchase contract, not advertised in the listing.
• Buyers sign their own representation agreements before touring homes, which spell out what their agent will be paid and by whom. If the seller doesn't cover it, the buyer does.

Practically, this means a seller has more explicit choices to make. You can offer nothing to the buyer's side, a flat amount, or a percentage — and your agent will advise on what's competitive in your local market.

What commission actually covers

Good listing agents earn their fee in a handful of high-leverage activities:

• Pricing. Setting a list price that maximizes net proceeds without sitting on the market.
• Marketing. Professional photography (and sometimes video and floor plans), staging guidance, MLS and syndication listings, and targeted local promotion.
• Showings and feedback. Coordinating access, handling lockbox and showing platforms, and reporting buyer feedback.
• Offer management and negotiation. Evaluating offers (not just price), countering, and managing the timing of multiple bids.
• Contract-to-close. Inspection responses, appraisal issues, title problems, and keeping the closing on schedule.

How to negotiate commission

Three things tend to give sellers leverage on commission:

• A higher-priced home. The percentage often compresses on luxury properties because the dollar amount is already large.
• A repeat client or a planned next purchase. Agents discount for multi-transaction relationships.
• An easy listing. Homes that are already prepped, priced right, and in a hot segment cost less to sell — which can be reflected in the fee.

Two important caveats: a lower commission isn't automatically a better deal if it comes with thinner marketing or weaker negotiation, and what you offer (or don't offer) the buyer's side affects how many buyers see and write offers on your home. Look at the all-in cost and the all-in service, not just the headline rate.

How commission flows into your net proceeds

At closing, the title or escrow company pays both brokerages from your sale proceeds before wiring you the balance. To see how commission moves the bottom-line number in your state, use the net proceeds calculator — for example the Georgia, Arizona, or North Carolina pages — and try a few different commission rates side by side.