How Much Is Real Estate Commission?


Real estate agents often get paid on commission—meaning they are compensated

based on the amount of money they bring to the transaction. For example, if your

home sells for $500,000, you might pay your agent $25,000 in commission.

However, many people have misconceptions about how much real estate

commission actually is, and the truth is that it’s significantly less than most think.

Traditionally, real estate commission rates have been negotiable between agents

and clients. Generally, the higher your broker’s commission rate, the more likely

they are to negotiate with you on the fee they charge to sell your home. However,

the total real estate commission paid in a transaction can vary depending on factors

such as the property’s sales price and where it is located.

For example, a commission rate of 6% is typical in New York, but it can be higher or

lower elsewhere. In some markets, competition is fierce, and you may find a broker

willing to reduce their commission in order to win your business. However, in other

markets, such as the luxury market, commission rates are typically higher.

In most cases, your real estate agent will receive 2.5% to 3% of the sale price as

their commission. This is typically split between the listing and buyer’s agents.

However, it’s not uncommon for one agent to represent both the buyer and seller in

a transaction. In this case, both agents will receive half of the commission.

Additionally, most broker-owned agencies have a “cap” on the percentage of the

sale they will keep as their commission. This is usually a percentage of the sales

price above a certain threshold, such as $2,000 or $5,000. This is so that brokers do

not get together and collude to set their commission rates. Also read

The rest of the commission is typically split between the sponsoring broker and the

listing agent. The sponsoring broker keeps the majority of the commission to offset

the costs of running their brokerage, and then gives the listing agent a smaller cut.

Then, the listing agent is required to pay a portion of the commission to their broker

—typically around 30% or 50% of the total commission.

Lastly, in some cases, buyers and sellers can negotiate for their broker to rebate a

portion of the commission back to them. However, this is not common, and in fact, a

Consumer Federation of America report found that only 27% of real estate agents

are willing to do so.

Another way that people save on commission is to work with an exclusive-rights-tosell

agent. Essentially, you’re working with an agent who is only getting the

commission if they sell your house—and they are competing with other agents to do

  1. This can often save you a significant amount of money in the long run.