What Are Real Estate Commissions?
If you’ve ever bought or sold a home, you’ve probably heard the term “real estate commission” come up during the process. For many people, this part of the transaction can feel confusing. Who pays it? How much is it? Is it negotiable? At Crescent Title, we help guide clients through every step of the real estate closing process. That includes helping you understand the role of commissions and how they affect your bottom line.
Whether you’re planning to sell your house or buy your first home, this detailed guide will break down what real estate commissions are, how they work, and what you should know before you close.
Understanding Real Estate Commissions
A real estate commission is the fee paid to real estate agents for helping buy or sell a property. It’s usually a percentage of the final sale price of the home. This fee is how real estate agents earn their income.
In most cases, the total commission is split between two agents:
1) The listing agent represents the seller.
2) The buyer’s agent represents the buyer.
Each agent usually works under a real estate brokerage, and a portion of the commission goes to that brokerage as well.
How Much Is a Real Estate Commission?
The standard real estate commission in the U.S. often ranges between 5% and 6% of the home’s final selling price. That amount is typically split 50/50 between the listing agent and the buyer’s agent.
For example:
If a home sells for $300,000 at a 6% commission rate, the total commission would be $18,000.
Each agent would receive $9,000, although they might give a portion to their brokerage.
It’s important to know that this percentage is not set by law. The rate is negotiable. Sellers can discuss commission rates with their agent before signing a listing agreement.
Who Pays the Real Estate Commission?
The real estate commission is almost always paid by the seller. It comes out of the proceeds from the home sale at closing. The buyer does not pay the commission directly. However, some experts argue that commissions are indirectly built into the home’s final price, meaning buyers may still feel the effects.
At the closing table, the title company (like Crescent Title) handles the commission payments. Once the sale is finalized, the title company distributes the agreed-upon amounts to each agent and brokerage based on the sales contract.
Is the Commission Rate Negotiable?
Yes, real estate commissions are negotiable. Many sellers do not realize they can ask for a lower rate. A few things to consider when negotiating commission:
Home price: Higher-priced homes may allow more room for lower commission percentages.
Market conditions: In a hot market where homes sell quickly, agents may be more willing to accept a lower rate.
Agent services: If the agent offers fewer services or limited support, you might be able to negotiate a discount.
Dual agency: If the same agent represents both the buyer and seller, they may reduce the total commission since it won’t be split.
Keep in mind that real estate agents are independent professionals. They’re not required to accept a lower commission, but there’s no harm in asking.
What Do You Get for the Commission You Pay?
Many people wonder why real estate commissions are so high. It's important to understand what you're paying for. Agents provide a wide range of services that can help ensure the transaction runs smoothly. These include:
For Sellers:
- Pricing the home using a comparative market analysis (CMA)
- Creating professional listings with high-quality photos and descriptions
- Marketing the property through MLS and online platforms
- Hosting open houses and private showings
- Managing offers and negotiating terms
- Guiding you through inspection results and repair requests
- Coordinating with the title company for a smooth closing
For Buyers:
- Finding properties that match your needs and budget
- Scheduling and attending property showings
- Analyzing market values and helping make competitive offers
- Writing and reviewing contracts
- Negotiating with sellers or their agents
- Attending inspections and appraisals
- Coordinating with the lender and title company to finalize the sale
Good agents do more than open doors. They reduce stress, handle paperwork, and help protect your interests throughout the deal.
Do Real Estate Agents Get Paid If the Sale Falls Through?
Usually, no. If a sale falls through before closing, real estate agents do not get paid a commission. They are only compensated if the deal is successfully completed. This means agents often work for weeks or even months without getting paid unless the transaction closes.
Some agents may ask for a small fee upfront, especially in specialized markets, but this is not the norm.
How Real Estate Commissions Affect Sellers
For sellers, real estate commissions are a key part of closing costs. When you receive an offer, you’ll want to factor the commission into your total net proceeds. Here's a quick example:
Sale price: $400,000
Commission (6%): $24,000
Remaining amount (before other costs): $376,000
This doesn’t include other closing costs such as taxes, fees, or title insurance, which Crescent Title can help you calculate.
Understanding how commissions fit into your sale helps you plan ahead and avoid surprises at closing.
How Real Estate Commissions Affect Buyers
While buyers don’t pay the commission directly, the presence of a buyer’s agent commission can still influence the process. A few key points for buyers:
- Your agent works for you, but gets paid through the seller’s proceeds.
- Some sellers may be more flexible on price if they’re paying less commission.
- In rare cases—especially in For Sale By Owner (FSBO) situations—you may need to pay your agent yourself.
It’s a good idea to clarify with your agent upfront how they are compensated and what their agreement with you looks like.
Changes in the Real Estate Industry
Real estate commissions have been in the news in recent years due to lawsuits and regulatory changes. Some consumers have started to question traditional commission models, and alternative structures are becoming more popular.
Here are a few alternative commission setups:
Flat-fee listings: The agent charges a fixed fee instead of a percentage.
Discount brokerages: These companies offer lower rates in exchange for fewer services.
Buyer rebates: Some agents offer part of their commission back to the buyer at closing.
For Sale By Owner (FSBO): The seller chooses to list the home without an agent, avoiding the listing agent’s commission.
Despite these alternatives, most transactions still involve traditional commission structures. The choice depends on your comfort level, the amount of time you can commit, and how much guidance you want.
How Crescent Title Works with Agents and Commissions
At Crescent Title, we work closely with real estate agents, buyers, sellers, and lenders to make sure that closing day goes off without a hitch. Part of our responsibility includes disbursing funds—like commissions—to the proper parties at the time of closing.
We don’t determine the amount of commission, nor do we influence how much you pay your agent. However, we do make sure that everything is documented correctly in the settlement statement and that funds are transferred securely and on time.
Frequently Asked Questions About Real Estate Commissions
Yes, if you sell your home without using a real estate agent (FSBO), you may not owe a commission. However, the buyer may still have an agent, and you may be asked to pay that agent's portion of the commission.
Yes. The total commission is split based on the terms listed in the MLS or sales contract. It doesn’t always have to be 50/50.
You may still owe your original agent a commission depending on your contract. Be sure to read the listing or buyer agreement before making changes.
It’s possible, but not always advisable. Real estate transactions involve contracts, deadlines, legal requirements, and negotiations. Having a qualified agent on your side can help protect your interests.
Crescent Title Is Here to Help You Close with Confidence
Whether you’re buying your first home, selling your current one, or simply exploring your options, understanding real estate commissions is a key part of managing costs and expectations. Crescent Title is committed to helping buyers and sellers navigate every stage of the process.
From title research and insurance to handling escrow and disbursing commissions, we take care of the important details so you can focus on your future. If you have questions about real estate closings or are preparing for a transaction, reach out to Crescent Title today. We’re here to guide you every step of the way.
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