How Real Estate Commissions Are Structured: What Every Seller Needs to Know

Greg Powell
Aug 5
3 min read

Updated: Aug 6

When you’re selling your home, one of the biggest expenses you’ll encounter is the real estate agent’s commission. But how exactly is that commission structured? Who pays it? And can it be negotiated? Let’s break it down:

1. What is a Real Estate Commission?

A real estate commission is the fee paid to real estate agents for their services in helping you sell (or buy) a property. It’s typically a percentage of the final sale price of the home.

2. What’s the Typical Commission Rate?

In most markets, commissions range from 5% to 6% of the home’s selling price. This can vary based on:

Local market conditions
The price point of the home
Negotiations with the agent

3. How is the Commission Split?

Here’s how the typical commission is divided:

Listing Agent (Seller’s Agent): 2.5% to 3%
Buyer’s Agent: 2.5% to 3%

Both agents are usually paid from the seller’s proceeds at closing. This split incentivizes both sides to work toward a successful sale.

4. Who Pays the Commission?

Technically, the seller pays the full commission, which is then split between the listing agent and buyer’s agent. However, the buyer indirectly contributes by paying the home’s purchase price.

5. Can Real Estate Commissions Be Negotiated?

Yes. While 5-6% is typical, commissions are not set by law and are fully negotiable. Some scenarios where you might negotiate:

You’re selling a high-priced or luxury property.
You’re willing to offer fewer services (e.g., no open houses).
You’re buying and selling through the same agent (dual agency).

6. What Does the Commission Cover?

A full-service agent’s commission often includes:

Professional photography & marketing
MLS listing and syndication
Open houses & private showings
Negotiation and transaction coordination
Market analysis & pricing strategies

7. Are There Flat-Fee or Discount Brokerages?

Yes. Some sellers opt for flat-fee MLS services or discount brokerages that charge lower commissions but offer limited services. Be cautious though—cutting corners can result in your home sitting on the market or selling for less.

8. Will Commissions Change in the Future?

There are ongoing discussions and legal cases about commission structures, especially regarding buyer’s agent compensation. Some markets may shift toward buyers paying their agent directly. For now, the seller-pays-both-sides model remains standard.

Bottom Line

While commissions are a significant cost, a skilled agent often pays for themselves by getting you a higher sale price, faster sale, and smoother transaction. Understand what you’re paying for, and don’t hesitate to discuss commission structure upfront with your realtor.

FAQs

1. Who pays the real estate commission?

Typically, the seller pays the full commission from the proceeds of the home sale. This amount is then split between the seller’s agent and the buyer’s agent.

2. What is the standard real estate commission rate?

Most commissions range from 5% to 6% of the home’s final sale price, though this can vary based on location and negotiation.

3. Can I negotiate the commission rate with my agent?

Yes, commissions are negotiable. Factors that influence negotiation include the home’s price, local market competition, and the level of service you expect.

4. How is the commission split between agents?

The total commission is generally split 50/50 between the listing agent (seller’s agent) and the buyer’s agent.

5. Are there alternatives to paying a full commission?

Yes. Options like flat-fee MLS services, discount brokerages, or FSBO (For Sale By Owner) can reduce commission costs. However, they may offer fewer services compared to a full-service agent.

6. Does the buyer pay their agent’s commission?

Not directly. The buyer’s agent is paid through the seller’s commission. However, buyers pay for this indirectly through the home’s purchase price.

7. Are real estate commissions the same everywhere?

No. Commission rates vary by region, brokerage policies, and market conditions. Always discuss fees upfront with your agent.

8. Are commissions affected if the home doesn’t sell?

Typically, agents only get paid when the home sells. If your home doesn’t sell, you usually don’t owe the commission, but check your listing agreement for any exceptions.

9. What’s included in a full-service agent’s commission?

Services often include:

Home staging & professional photography
MLS listing & online marketing
Open houses & private showings
Pricing strategy & market analysis
Negotiation & transaction management

10. Will commissions change in the future?

There are discussions about potential changes to commission structures, especially regarding how buyer’s agents are compensated. For now, the seller-pays-both model is still the norm.