1. What is a Real Estate Commission?

A real estate commission is the fee paid to real estate agents or brokers for their services in facilitating a property sale. This fee is typically a percentage of the final sale price of the property and is usually split between the buyer's and seller's agents.

2. How Commission is Calculated

The commission is calculated using this simple formula:

Where:

• \( \text{Sale Price} \) — The final selling price of the property
• \( \text{Commission Rate} \) — The agreed percentage rate for the commission

Example: For a $500,000 home with a 5% commission rate, the total commission would be $25,000.

3. Typical Commission Rates

Details: While commission rates are negotiable, they typically range between 4-6% of the sale price in most markets. The exact rate depends on local market conditions, property type, and the services provided.

4. Using the Calculator

Tips: Enter the property sale price in dollars and the commission rate as a percentage (e.g., 5 for 5%). The calculator will compute the total commission amount.

5. Frequently Asked Questions (FAQ)

Q1: Who pays the real estate commission?
A: Typically, the seller pays the commission, which is deducted from the sale proceeds at closing.

Q2: Is the commission rate fixed?
A: No, commission rates are always negotiable between the seller and their listing agent.

Q3: How is the commission split between agents?
A: The total commission is usually split between the listing broker and buyer's broker, often 50/50 but this can vary.

Q4: Are there alternatives to percentage-based commissions?
A: Some brokers offer flat-fee or tiered commission structures, though percentage-based remains most common.

Q5: Are commissions taxable?
A: Yes, commissions are considered taxable income for the real estate professionals receiving them.