What is Real Estate Commission?

Real estate commission is a fee pad to a real estate brokers for their services in helping clients buy or sell a property. This fee is typically a percentage of the sale price of the property and is paid by the seller at the closing of the transaction.

Real estate brokers provide a range of services to their clients. When selling your home, the commission should cover everything you’re expected to pay your real estate agent. There should be no additional fees. The real estate commission will cover a myriad of things, including:

  • Putting your home in the Multiple Listing Service
  • Professional photography
  • Adding your property to the top websites buyers visit
  • Creating a marketing plan
  • Providing marketing materials such as color brochures
  • Sending out postcards and other marketing material
  • Coordinating showings and feedback from them
  • Negotiating offers, home inspections and other transactions
  • Communicating with client throughout transaction
  • Staying in touch with multiple parties, including the other agent, mortgage broker, attorneys and other involved parties
  • Helping with any vendors needed to make the sale go smoothly

It is important to note that the commission is typically paid by the seller, not the buyer. There are some circumstances where a buyer may pay a real estate agent. For example, if you are working with a buyer’s agent and they find you a home for sale by owner, you might need to pay the agent, Some FSBOs will not pay a real estate agent’s commission. This buyer agent will ask the buyer to pay them a few in cases like this one. Technically, a buyer can make an offer less the commission the seller would typically have paid, so they are not taking the money out of their own pocket. If a buyer’s agent agreement is signed, the agent may also expect a certain percentage from the sale. For example, an agent may have in their contract that they need to be paid 2.5 percent of the sales price. IF the seller only offers a 2 percent co-broke fee, the buyer would be expected to make up the half percent difference.

The commission rate can vary depending on a number of actors, including the location of the property, the type of property being sold, and the level of services provided by the agent or broker. In most cases, the commission rate is negotiable, but it is important to remember to understand that the commission is not set by law and can vary from one agent to another.

As an example, a commission rate may be between 5% and 6% of the sale price of the house. This amount is split between the buyer’s agency and the seller’s agency. So, if you sell a home for $500,000 with a 5% commissison, your real estate agent is not walking away with $25,000. They are not even walking away with $12,500 because they will have a commission split with their broker also.

Without a doubt, a real estate agent commission is a significant amount of money. It is essential to get value from what you are paying. Real estate brokers do not get paid until they successfully close the sale for you, so they want to do the best job for their client. Make sure you choose a broker with experience and a track record of success above all else. In real estate, you truly get what you pay for.


Written by Polly Leadbetter, License Partner & Managing Broker of Engel Völkers Foothills