When buying or selling a property, one of the most common questions people ask is: “How do broker commissions work?” Understanding real estate commissions is essential for budgeting, negotiating, and ensuring a smooth transaction. In this guide, we’ll break down what broker commissions are, who pays them, and how they can affect your deal.

What Is a Broker Commission?

A broker commission is the fee paid to real estate agents or brokers for facilitating the sale or purchase of a property. It compensates them for their time, expertise, marketing expenses, and negotiation skills.

Commissions are typically a percentage of the property’s final sale price—most commonly between 5% and 6% in the U.S.—but rates can vary depending on the market and agreement between the parties.

Who Pays the Broker Commission?

In most real estate transactions, the seller pays the broker commission, which is then split between:

• Listing Agent – Represents the seller

• Buyer’s Agent – Represents the buyer

For example, if the commission is 6% on a $400,000 home, the total commission is $24,000. This might be split 50/50, meaning each agent gets $12,000 before their brokerage takes its share.

How Broker Commissions Are Calculated

Broker commissions are usually structured as:

Final Sale Price × Commission Rate = Total Commission

Example:

• Home Price: $350,000

• Commission Rate: 5%

• Total Commission: $17,500 (split between agents and brokerages)

Some agents may also agree to a flat fee or a tiered commission structure based on how quickly or for how much the home sells.

Can You Negotiate Broker Commissions?

Yes! Commissions are not fixed by law and are negotiable. Factors that can influence commission rates include:

• Local market conditions

• Property type and price

• Agent’s experience and marketing plan

• Whether one agent represents both buyer and seller (dual agency)

Why Broker Commissions Matter

A good agent can often net you more money on your sale than you might get without one, even after paying their commission. They bring:

• Professional marketing and photography

• Access to the MLS and wider buyer pool

• Skilled negotiation to maximize your price or terms

• Guidance through contracts, inspections, and closing

Tips for Managing Broker Commissions

• Ask up front what the commission rate is before signing a listing agreement.

• Compare agents, but don’t choose solely on commission rate—experience and success rate matter.

• Negotiate terms if your property is likely to sell quickly.

• Understand your contract, especially how commissions are handled if the sale falls through.

Broker commissions are an important part of real estate transactions, but they’re also flexible and negotiable. By understanding how they work and asking the right questions, you can ensure you’re getting the best value from your agent while protecting your bottom line.

Matt Witte strives to be the best realtor in Andover MA.

Any questions about real estate, reach out to Matt Witte, Andover

Realtor MA