Real Estate Commission Calculator (U.S. Context)
Estimate the total real estate commission on a U.S. property sale, how it's typically split, and the agent's potential net earnings after broker splits.
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Understanding U.S. Real Estate Commission
Real Estate Commission is the primary way real estate agents and brokers are compensated for facilitating a property sale. In the United States, it's typically paid by the seller from the proceeds of the sale.
Typical Calculation & Rates:
Total Commission = Property Sale Price × Total Commission Rate (%)
While negotiable, total commission rates in the U.S. have commonly ranged from **5% to 6%**, although rates can vary by market and negotiation.
Common Commission Splits:
The total commission is rarely kept by one entity. It's typically split multiple ways:
- Broker-to-Broker Split: The listing broker (representing the seller) usually agrees to split the total commission with the buyer's broker (representing the buyer). This is often facilitated through the Multiple Listing Service (MLS). A 50/50 split between the two sides is common, meaning each brokerage receives half of the total commission.
- Agent/Broker Split: Each individual agent (listing and buyer) works under a sponsoring broker and splits their side's commission with that brokerage based on their independent contractor agreement. These splits vary significantly based on agent experience, production, and brokerage model (e.g., 50/50, 60/40, 70/30, 80/20, or even higher splits with associated fees). This calculator assumes the same split percentage applies to both agents for estimation purposes.
Example (U.S. Context):
Sale Price = $450,000, Total Rate = 5%, Listing/Buyer Split = 50/50, Agent/Broker Split = 70%
- Total Commission = $450,000 * 5% = $22,500
- Listing Side Commission = $22,500 * 50% = $11,250
- Buyer Side Commission = $22,500 * 50% = $11,250
- Listing Agent's Net = $11,250 * 70% = $7,875 (Broker gets $3,375)
- Buyer Agent's Net = $11,250 * 70% = $7,875 (Broker gets $3,375)
- Seller's Net Proceeds = $450,000 - $22,500 = $427,500
Key Points:
- Commissions are **negotiable**.
- The MLS system facilitates cooperation between brokers, typically involving an offer of compensation from the listing broker to the buyer broker.
- Agents incur business expenses (marketing, MLS dues, insurance, transportation) that are paid out of their net commission.
Frequently Asked Questions (FAQs)
Are commission rates fixed by law?
No. There are no laws setting commission rates. Rates are determined by competition in the market and negotiation between the seller and the listing broker.
Do buyers pay commission?
Traditionally, the seller pays the total commission, which is then split. Buyers typically do not pay commission directly out-of-pocket, although this cost is arguably factored into the final sale price.
What is an agent/broker split?
Real estate agents typically work under a licensed broker. The split determines how the commission earned by the agent on a transaction is divided between the agent and their sponsoring brokerage firm.
