Explanation Of Sales Commission In Real Estate

Definition of "Sales commission"

Rich Northrup, Real Estate Agent Wainwright & Co., Realtors

Broadly speaking, a commission is a remuneration a person receives after acting on someone else’s behalf.

In the real estate world, you’ll usually hear the term “sales commission”, which is the remuneration a real estate broker and/or agent earns in regards for his/her service representing the home seller (or the home buyer) in a house buying/selling transaction.

Well… most of the times, at least.

Sorry if you’re looking for easy answers; the real estate market is complex - that’s why an agent expertise is something you should not turn your back to.

Sometimes agents do earn money regardless of a house being sold: Buyer’s agents, for instance, might earn a real estate sales commission even if the prospective home buyer doesn’t end up buying a house. Think about it: the buyer’s agent drove the client around showing houses on the weekend, shared his/her educated knowledge regarding the real estate market… that comes at a cost and it wouldn’t be right if the agent gets nothing out of it should the client decide it’s not the right time to buy a house.

And there are some times when the agent gets no real estate commission at all! Yup; even if the house is sold! If an agent entered an Open Listing or an Exclusive Agency Listing but did not manage to bring the final offer to the table, then the real estate commission will go to the agent who brought it or to the homeowner.

The standard real estate sales commission is 5% to 6% of the final sales price and the listing agent splits it evenly with the buyer’s agent.

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