Real Estate Commission Calculator
Commission Breakdown
Understanding Real Estate Commissions
When selling a home, one of the largest closing costs is the real estate commission. This fee is paid to the licensed professionals who facilitate the transaction. Typically, the seller pays the total commission, which is then split between the listing brokerage and the buyer's brokerage.
How Commission is Calculated
Most real estate agents charge a percentage of the final sale price. While 5% to 6% is common in many markets, it is important to remember that commissions are negotiable by law. The total percentage is usually divided into two parts:
- Listing Agent Fee: Compensates the agent for marketing, photography, listing the home on the MLS, and managing showings.
- Buyer's Agent Fee: Offered to the agent who brings the qualified buyer to the table.
Example Calculation
If you sell a home for $500,000 with a 6% commission:
- Total Commission: $500,000 × 0.06 = $30,000.
- If the split is 50/50, the listing agent gets $15,000 and the buyer's agent gets $15,000.
- After adding a $500 administrative flat fee, your total cost is $30,500.
- Your estimated net proceeds (before other closing costs like taxes or title insurance) would be $469,500.
Who Pays the Commission?
In traditional transactions, the seller pays the full commission from the proceeds of the sale. However, recent changes in industry regulations (such as the NAR settlement) are making the process more transparent, allowing for more direct negotiations between buyers and their agents regarding compensation.
Strategies to Save on Commissions
Sellers looking to save money may consider discount brokerages, "For Sale By Owner" (FSBO) platforms, or negotiating a lower rate if they are also buying their next home with the same agent. However, keep in mind that a highly skilled agent can often negotiate a higher sale price that more than covers their commission cost.