Real Estate Commission: What It Is, Who Pays, and How to Keep It Low

If you’ve ever looked at a house listing, you’ve probably seen a number like "3% commission" next to the price. That number is the real estate commission – the fee agents earn for getting a deal done. It might sound confusing, but the basics are simple: the commission is a percentage of the final sale price, split between the buyer’s and seller’s agents, and paid at closing.

Most of the time, the seller pays the whole commission out of the sale proceeds. The buyer’s side usually doesn’t see a separate charge, even though their agent gets a cut. Why does the seller foot the bill? Because the seller benefits from the agent’s marketing, showings, and negotiation work, and the buyer’s agent is compensated through the same pool.

Typical Commission Rates and How They’re Divided

In the United States, the standard rate hovers around 5% to 6% of the sale price. That amount is then split, often 50/50, between the listing (seller’s) agent and the buyer’s agent. So if a home sells for $300,000 with a 6% commission, the total fee is $18,000 – $9,000 for each agent.

Some markets or price ranges have different norms. Luxury homes might see lower percentages because the dollar value is higher, while starter homes could have a higher rate. In some places, agents agree to a flat fee instead of a percentage, especially for rentals.

Can You Negotiate the Commission?

Absolutely. Commission isn’t set in stone by law; it’s a contract between you and your agent. If you feel the standard rate is too high, ask for a lower percentage or a capped fee. Many agents are willing to adjust if the property is likely to sell quickly or if you’re a repeat client.

Here are three quick tips to negotiate:

• Know the local market. If comparable homes are selling on lower commissions, you have leverage.
• Offer a higher listing price. Some agents agree to reduce their cut if you give them a bigger incentive.
• Bundle services. If you need both buying and selling help, ask for a combined discount.

Remember, the cheapest commission isn’t always the best deal. An experienced agent might charge more but close the sale faster, saving you time and hidden costs.

For buyers, it’s worth asking your agent how they get paid. If the seller’s commission is unusually low, the buyer’s agent might be taking a bigger share, which could affect the advice they give.

Bottom line: the real estate commission is a shared cost that funds the work both agents do. Knowing who pays what, typical rates, and how to negotiate puts you in control of one of the biggest expenses in a property transaction.

Next time you see a listing, you’ll understand that the commission isn’t a mysterious tax – it’s a negotiated fee that you can influence with a little research and a clear conversation.