How The Real Estate Commission Works:

1. Commission Rate:
   • The commission rate is usually negotiated upfront when a seller contracts with a real estate agent. Commonly, this rate ranges from 5% to 6% of the home’s sale price, but it can vary depending on the region and the specifics of the transaction.
   • For example, if a home sells for $500,000  and the commission  rate  is  5%, the total commission would be 25,000.
2. Split Between Agents:
   • Typically, the total commission is split between the listing agent (the agent who represents the seller) and the buyer’s agent (the agent who represents the buyer). A common split is 50/50, but this can be negotiated differently.
   • Using the above example, if the commission is $25,000, each agent might receive 12,500.
3. Services Provided by Agents:
   • Listing Agent: Helps the seller set a price, markets the property, arranges showings, negotiates offers, and handles paperwork and closing details.
   • Buyer’s Agent: Assists the buyer in finding a home, negotiating the purchase price, arranging inspections, and managing the closing process.
4. Who Pays the Commission?:
   • The commission is typically paid by the seller out of the proceeds from the sale of the home. The amount is deducted from the sale price at closing.
   • Although the seller pays the commission, it is often factored into the listing price of the home, meaning the buyer indirectly contributes to the commission through the purchase price.
5. 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.
6. 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 certain sale price.

Example Calculation:

1. Sale Price: $500,000
2. Commission Rate: 5%
3. Total Commission: $500,000 * 5% = $25,000
4. Split Between Agents: $25,000 / 2 = $12,500 each for the listing agent and the buyer’s agent.

Key Considerations:

• Negotiability: Commission rates are not fixed by law and can be negotiated between the seller and the agent.
• Value for Money: Consider the services provided by the agent, their experience, and their success rate when negotiating the commission.
• Discount Brokers: Some agents or brokerages offer lower commission rates but may provide fewer services.

 Real estate commission is a critical part of the home-selling process, compensating agents for their expertise and services in marketing, negotiating, and closing the sale of a property. Understanding how commissions work can help sellers make informed decisions and potentially negotiate better terms.