Commission
Real estate agents earn a commission, usually a percentage of the sale price. Understand how commissions are negotiated and split between agents and brokers.
Definition
A commission is the compensation paid to real estate agents and brokers for facilitating a sale, typically calculated as a percentage of the property's sale price. According to Investopedia, agents historically earned most of their income from commissions, which were often split between the listing agent and the buyer's agent. Recent rules require buyers to sign representation agreements and pay their own agents, while sellers continue to pay listing commissions, and listing agents can no longer advertise commissions on the MLS. Commission rates vary by region, market conditions, property type, and agent experience. Flat‑fee and hourly models exist but are less common. Buyers and sellers should discuss commission structures early and ensure they're documented in agency agreements.
Why It Matters
Commission is usually the largest single cost of selling, bigger than excise tax, repairs and escrow combined. At 5% on a $750,000 sale that is $37,500, and since the 2024 NAR settlement reshaped how buyer agent pay is handled, the amount is genuinely open to negotiation. Sellers can offer buyer agent compensation or decline; flat-fee models like Wayber list in the NWMLS for a fixed cost instead of a percentage.
Examples
A seller negotiates the listing side from 3% to 2.25% on a $1.1M home, keeping $8,250, and separately decides to offer 2% to the buyer's agent.
A buyer's agreement calls for 2.5% but the seller offers nothing. The buyer asks for a seller credit toward agent compensation inside the offer and gets 2%.
A listing agent splits her 2.5% with her brokerage on a 70/30 arrangement, which is why a rate reduction affects two parties, not one.
Tips
Treat the listing rate and the buyer agent offer as two separate numbers, because after 2024 they are two separate decisions.
Ask exactly what the quoted rate includes: professional photography, floor plan, 3D tour, print, open houses and who staffs them. Then ask what the same firm charges without those.
Put compensation terms in the listing agreement in writing, including what happens if the buyer is unrepresented. A rate that assumes a cooperating agent should drop when nobody is on the other side.
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