What is a real estate commission?

A real estate commission is a fee paid to a real estate agent for the services they provide during the process of buying or selling a property. This commission is usually calculated as a percentage of the final sale price of the property, which serves as compensation for the agent's expertise, marketing efforts, and negotiation skills.

Typically, the commission is agreed upon in the listing agreement between the seller and their agent. It is often shared between the seller's agent and the buyer's agent, which incentivizes both parties to work towards closing the deal. This model reflects the industry standard and helps ensure that agents are motivated to secure the best possible outcomes for their clients.

Understanding that real estate commissions are usually expressed as a percentage rather than a flat fee or fixed number for every transaction is crucial for both buyers and sellers, as it emphasizes the variable nature of this compensation based on the property’s sale price.