Commission Real Estate

· 2 min read
Real estate commission is the percentage of the sale price that goes to the agents involved in the transaction — and it’s usually the single…

Real estate commission is the percentage of the sale price that goes to the agents involved in the transaction — and it’s usually the single biggest cost of selling a home. On a $400,000 sale with a 5.5% total commission, that’s $22,000 walking out the door.

How Commission Works

Traditionally, the seller pays a total commission (typically 5-6% of the sale price) that gets split between the listing agent’s brokerage and the buyer’s agent’s brokerage. Each brokerage then splits its share with the individual agent, often 50/50 for newer agents and 70/30 or 80/20 for experienced ones.

So on that $400,000 sale with 6% commission: $24,000 total. The listing brokerage gets $12,000. The buyer’s agent brokerage gets $12,000. Each agent might take home $6,000-$9,600 before taxes, depending on their split. The agent who showed you ten houses over three weekends might net $6,000 for months of work.

The NAR Settlement Shake-Up

The 2024 NAR settlement changed how buyer agent compensation works. Sellers are no longer required to offer buyer agent commission through the MLS. Buyers can negotiate their own agent’s compensation, and buyer representation agreements are now required before agents can show homes.

In practice, many sellers still offer buyer agent compensation because it expands their buyer pool. But the amount is increasingly negotiable, and some sellers offer nothing — expecting buyers to handle their own agent fees.

What’s Negotiable

Everything. The listing agent’s rate, the buyer agent’s rate, flat fees vs. percentages, bonuses for quick sales — all of it can be discussed before you sign the listing agreement. Agents who say commission rates are “set” or “standard” are being misleading. There are no fixed rates, and there never have been.

That said, agents who deeply discount their rate may provide correspondingly less service. A 1% listing agent handling 50 clients simultaneously won’t give you the same attention as a 2.5% agent with 15 clients. You’re buying a service, and the cheapest option isn’t always the best value.

Ways to Reduce Commission

Negotiate the listing agent’s rate down, especially on higher-priced homes. A 2% listing commission on a $600,000 home still pays the agent $12,000. Offer a lower buyer agent rate (1.5-2% instead of 2.5-3%) — some buyer agents will still show the home. Use a discount broker or flat-fee MLS service. Sell FSBO and skip the listing commission entirely.

Each approach has trade-offs. Lower buyer agent compensation may reduce showing activity. FSBO means more work for you. Discount brokers may provide less marketing support. There’s no free lunch — but there are definitely cheaper lunches.

Commission and Your Bottom Line

On that $400,000 home, the difference between 5% and 6% commission is $4,000. The difference between 5% and FSBO (offering 2.5% to buyer’s agent only) is $10,000. These are real numbers that directly affect what you walk away with.

Plug different commission scenarios into the net proceeds calculator to see how they affect your take-home. The selling guide covers how to evaluate agent value, and the glossary explains related terms like listing agreement, exclusive right to sell, and discount broker.