# Real estate commission

> The fee a brokerage earns for helping you buy or sell a home, usually a percentage of the sale price or a flat amount. Commissions are negotiable and are not set by law or by any association.

Also called: realtor fees, agent commission, broker fee, real estate agent fees. Topic: Contracts, agents and the MLS.

The fee is set in writing: the [listing agreement](https://brokerandagent.com/glossary/listing-agreement) for a seller’s agent and the [buyer agreement](https://brokerandagent.com/glossary/buyer-agency-agreement) for a buyer’s agent. Under NAR’s rules since August 2024, those agreements must say plainly that the fee is fully negotiable and not set by law.

## How is a real estate commission calculated?

Usually as a percentage of the [sale price](https://brokerandagent.com/glossary#sale-price), a flat fee, or a mix of the two. Some agents charge a base fee plus a smaller percentage, and some use a lower rate above a certain price. Whatever the structure, it’s agreed between you and the brokerage before the work starts.

There is no standard rate. Fees differ by agent, brokerage, market and the services included, and no law or association sets them.

The commission is paid to the brokerage, not straight to the agent. The brokerage then pays the agent their share under a [commission split](https://brokerandagent.com/glossary#commission-split), and may pay a [referral fee](https://brokerandagent.com/glossary#referral-fee) if another agent sent the client.

## Who pays the commission?

Each side’s agreement says what that side’s agent will be paid. Sellers usually pay their listing brokerage from the sale proceeds at [closing](https://brokerandagent.com/glossary#closing). Buyers are responsible for what their buyer agreement says, unless the seller agrees to cover some or all of it.

Sellers can still agree to pay a buyer’s agent. Since August 17, 2024, that offer can’t appear on the MLS, but it can be made off the MLS, and buyers can ask for it in their offer. These are often called [offers of cooperative compensation](https://brokerandagent.com/glossary#cooperative-compensation).

Because commissions come out of the money at closing, they appear on the [settlement statement](https://brokerandagent.com/glossary#settlement-statement) with the other costs.

## What changed with the NAR settlement?

The [NAR settlement](https://brokerandagent.com/glossary#nar-settlement) brought two changes buyers and sellers notice. Offers of compensation to buyer brokers can no longer be published on the MLS. And agents working with a buyer through the MLS need a written agreement before touring a home, with the pay stated as a specific amount or rate, not a range.

An agent working with a buyer also can’t receive more than the agreement allows from any source, including the seller.

## Can you negotiate a real estate commission?

Yes. You can ask about the rate, a flat fee, a different fee if one agent handles both sides, or dropping services you don’t need. Compare what’s included, like photography, pricing advice, marketing, open houses and help through closing, not just the number.

A lower fee isn’t always the better deal, and a higher one doesn’t guarantee better service. Ask each agent to walk you through what they’ll do and what you’d likely walk away with.

## How the money moves on a $400,000 sale

| | |
| --- | --- |
| Sale price | $400,000 |
| Listing brokerage fee (2.5% in this example) | $10,000 |
| Buyer’s brokerage fee the seller agreed to pay (flat fee in this example) | $7,500 |
| Total commissions paid from the seller’s proceeds | $17,500 |
| Listing agent’s share under a 70/30 split (example) | $7,000 |
| Kept by the listing brokerage | $3,000 |

The rates, flat fee and split are made up to show the math. Every fee is negotiated, and here the seller agreed to cover the buyer’s agent; without that, the buyer would owe their agent under their own agreement.

## Common mistakes

- Believing there’s a standard commission rate. There isn’t; every fee is negotiated.
- Assuming the seller always pays the buyer’s agent. The buyer agreement decides what you owe unless the seller agrees to pay.
- Thinking the agent keeps the whole commission. It goes to the brokerage, which pays the agent their split.
- Comparing fees without comparing what each agent will actually do.

## Questions

### Are real estate commissions set by law?

No. Commissions are negotiable between you and the brokerage, and no law or association sets them. NAR’s rules now require written agreements to say so.

### Do buyers pay real estate commissions now?

A buyer owes what their written buyer agreement says, unless the seller agrees to pay some or all of it. Buyers can ask for that in their offer.

### When is the commission paid?

Usually at closing, out of the money that changes hands, and it’s listed on the settlement statement. If the sale doesn’t close, the agreement says whether anything is owed.

### How do I see what a commission does to my proceeds?

A [seller net sheet](https://brokerandagent.com/glossary/seller-net-sheet) subtracts commissions, closing costs and your loan payoff from the sale price to estimate what you’ll walk away with.

Calculator: [Seller net sheet calculator](https://brokerandagent.com/tools/seller-net-sheet-calculator)

## Related terms

- [Listing agreement](https://brokerandagent.com/glossary/listing-agreement): A contract between a home seller and a brokerage that gives the brokerage the right to market the home for a set period, and spells out the asking price, the commission, the agent’s duties and how the listing ends.
- [Buyer agency agreement](https://brokerandagent.com/glossary/buyer-agency-agreement): A written contract between a home buyer and an agent’s brokerage that sets out the agent’s duties, how long it lasts and how the agent is paid. Since August 2024, agents who use the MLS need one before touring a home with you.
- [NAR settlement](https://brokerandagent.com/glossary#nar-settlement): NAR’s 2024 settlement of lawsuits over agent commission rules. Since August 17, 2024, offers of buyer-agent pay can’t be made on the MLS, and agents working with a buyer through the MLS need a written agreement before touring a home.
- [Cooperative compensation](https://brokerandagent.com/glossary#cooperative-compensation): Pay that a listing brokerage or seller offers to the brokerage that brings the buyer. Since August 17, 2024, these offers can’t appear on the MLS, but sellers can still agree to them off the MLS or in the deal.
- [Seller net sheet](https://brokerandagent.com/glossary/seller-net-sheet): A seller net sheet is an estimate of what a home seller walks away with after the sale: the price minus commissions, the mortgage payoff, closing costs, taxes and any credits to the buyer.
- [Commission split](https://brokerandagent.com/glossary#commission-split): How a commission is divided between an agent and their brokerage, and sometimes their team. The share each side keeps varies widely by brokerage and is set in the agent’s agreement.

## Sources

- [NAR: What the settlement means for home buyers and sellers](https://www.nar.realtor/the-facts/what-the-nar-settlement-means-for-home-buyers-and-sellers)
- [NAR: Settlement FAQs](https://www.nar.realtor/the-facts/nar-settlement-faqs)
- [NAR: Consumer guide to written buyer agreements](https://www.nar.realtor/the-facts/consumer-guide-written-buyer-agreements)

Checked 2026-10-02 by the Broker & Agent team. General information, not legal, tax or lending advice.

Source: https://brokerandagent.com/glossary/real-estate-commission