Real estate commission is calculated by multiplying the property’s sale price by the commission rate.
For example, if a home sells for $300,000 and the commission rate is 6%, the total commission is $18,000.
This amount is then typically split between the buyer’s agent and the seller’s agent, and further divided with their brokers.
In this piece, we'll walk you through the commission formula and provide step-by-step examples with real numbers. You'll see how commission is calculated in various scenarios.
What is Real Estate Commission and How Does It Work?
Real estate commission represents the fee paid to agents who facilitate property transactions. This payment structure is calculated as a percentage of the property's final sale price and paid only when the transaction closes.
Standard Commission Rates in the US
Commission rates in the United States range between 5% and 6% of the home's sale price. The national average real estate commission stands at 5.57% in 2025. Rates can fall as low as 4% or climb as high as 7% for residential properties in certain markets. Commercial properties sometimes reach 10%.
A 6% commission equals $24,000 on a $400,000 home sale. A $200,000 property at 5% generates $10,000 in total commission. Recent data shows that only 6% of agents charge less than 5% commission. About 89.8% of agents operate within the standard national average range.
Who Pays the Real Estate Commission
Sellers paid commissions for both their agent and the buyer's agent in the past. The total amount was deducted from sale proceeds at closing. $24,000 would come out of the seller's proceeds on a $400,000 home with 6% commission.
Most important changes occurred in August 2024 when the National Association of Realtors established new rules following a class-action settlement. Responsibility for paying the buyer's agent commission shifted from sellers to buyers under this framework. Buyers working with NAR members must now sign written buyer-agent agreements before touring homes.
Sellers can still cover the buyer's agent commission through cooperative compensation arrangements despite these changes, as long as the offer is shared off the multiple listing service in accordance with NAR rules. Recent surveys show that 92% of top agents report sellers are still paying the buyer's agent commission.
How Commission is Split Between Agents
The total commission divides between the listing agent and buyer's agent, often in a 50/50 split. Each agent receives 2.5% to 3% of the sale price. Each agent receives $5,000 on a $200,000 sale with 5% total commission.
Agents then split their portion with their brokers. Common broker split structures include 50/50, 60/40, and 70/30 arrangements. More experienced agents often negotiate favorable splits. The agent keeps $7,700 while the brokerage retains $3,300 if a listing agent operates on a 70/30 split and receives $11,000.
Basic Real Estate Commission Formula
The simple commission formula multiplies the property sale price by the commission rate percentage. This calculation determines the total commission earned on any real estate transaction.
The Standard Commission Calculation
The main formula to calculate commission is: Sale Price × Commission Rate = Total Commission.
Convert the percentage to a decimal by dividing it by 100 when you apply this formula. To cite an instance, a 5.5% rate becomes 0.055.
A home that sells for $500,000 with a 5.5% commission rate works out as follows: $500,000 × 0.055 = $27,500. On a $200,000 property at 5%, the total commission equals $10,000. A $325,000 home at 4.75% means you multiply $325,000 × 0.0475 and get $15,437.50.
Commission Rate Percentage Explained
You can reverse the formula and find missing variables. When you know the commission amount and rate, use this to determine the sale price: Commission ÷ Commission Rate = Sale Price. A $10,000 commission at 5% means the property sold for $10,000 ÷ 0.05 = $200,000.
When you have the dollar amount and sale price, find the commission rate this way: Commission ÷ Sale Price = Commission Rate. If you earned $10,000 on a $200,000 sale, divide $10,000 ÷ $200,000 = 0.05, or 5%.
Calculating Buyer's and Seller's Agent Shares
Divide the total commission between agents after you determine it. With a typical 50/50 split, each agent receives half. On a $10,000 total commission, both the buyer's and seller's agents get $5,000 each.
You can also calculate using half the commission percentage. A 5% rate split equals 2.5% per agent. On $200,000: (2.5 ÷ 100) × $200,000 = $5,000 per agent.
How to Calculate Real Estate Commission: Step-by-Step Examples
Real transactions show how different variables affect your earnings when you apply the commission formula. Sale price, commission rate, and broker splits combine in each scenario and determine your actual payment.
Example 1: Standard 6% Commission Split
A home sells for $500,000 with a 6% total commission. The calculation produces $30,000 in total commission. This splits evenly between buyer's and seller's agents. Each side gets $15,000.
Example 2: Negotiated Commission Rate
A $400,000 home with a negotiated 3% commission rate equals $12,000 in total commission. You keep 70% with a 70/30 broker split. Your share becomes $8,400.
Example 3: Luxury Property Commission
Luxury properties operate at different rates. A $3 million home at a 2.5% commission generates $75,000 in total commission. An 80/20 split favors the agent, and you retain $60,000. A $1.2 million property at 3% commission reaches $36,000 in total. An 80/20 split yields $28,800 to the agent.
Example 4: Commission with Broker Split
Think about an $850,000 sale with a 6.5% commission rate. This produces $55,250 total. The buyer's and seller's brokerages split this 50/50 and allocate $27,625 to each side. Your broker keeps 70% and gives you 30%. You receive $8,287.50.
Calculating Your Take-Home Commission
Multiply the sale price by your commission rate, then apply your broker split percentage. This determines your actual earnings. A $350,000 home at 2.5% commission creates $8,750 total. A 70/30 split leaves you with $6,125.
Factors That Impact Real Estate Commission Calculations
Several variables affect how commission calculations play out in actual transactions. Property sale price directly affects commission dollars. Commission rates across most markets range from 5% to 6% of the home sale price. All the same, rates aren't fixed by law and vary based on market conditions, property value, brokerage policies and local customs.
Property Sale Price
Higher-priced properties sometimes carry lower percentage rates because the dollar amount remains substantial. Luxury homes at 2.5% still generate large commissions. Vacant land or properties requiring extended marketing efforts might command higher rates to compensate agents for longer timelines, on the other hand.
Local Market Standards
Geographic location affects rates greatly. The Northeast, California and the Pacific Northwest have the highest house prices and lower commission rates. Market conditions change negotiation leverage. Agents maintain firmer rates in sellers' markets. Buyers' markets create more flexibility.
Broker Fee Structure
Your brokerage's business model determines net earnings. Agent experience and contract terms determine commission splits. Full-service brokerages that provide training typically offer lower splits than 100% commission brokerages.
Additional Transaction Costs
Administrative fees ranging from $200 to $1,895 appear on top of standard commission structures. These flat charges go directly to brokerages. Many buyers and sellers don't realize transaction fees are negotiable until closing.
Conclusion
You now have everything you need to calculate real estate commissions with precision. The formulas are simple: multiply the sale price by the commission rate, then apply broker splits to determine what you actually earn. These calculations remain consistent for all transactions, whether you work with standard 6% rates or negotiated percentages. Understanding these numbers helps you project income and negotiate better terms, which matters most. Keep practicing with different scenarios. Commission calculations will become second nature.
Key Takeaways
Understanding real estate commission calculations is crucial for maximizing your earnings and making informed business decisions in property transactions.
• Use the basic formula: Sale Price × Commission Rate = Total Commission (e.g., $300,000 × 6% = $18,000 total commission)
• Standard rates range 5-6% nationally, but are negotiable based on market conditions, property value, and local customs
• Commission splits twice: First between buyer's and seller's agents (typically 50/50), then between agent and broker (varies by experience)
• Your take-home depends on broker splits: A $10,000 commission with 70/30 split nets you $7,000 after broker fees
• Higher-priced properties often have lower percentage rates but still generate substantial dollar amounts due to the sale price
Remember that recent NAR rule changes shifted payment responsibility, with buyers now typically paying their agent's commission directly rather than through the seller.
FAQs
Q1. How do you calculate commission on a real estate sale? To calculate real estate commission, multiply the property's sale price by the commission rate percentage. For example, if a home sells for $300,000 with a 6% commission rate, you would calculate $300,000 × 0.06 = $18,000 in total commission. This straightforward formula applies to all real estate transactions.
Q2. Can real estate agents work for a 2% commission rate? Yes, agents can accept a 2% commission, which is typically considered the minimum listing rate for traditional agents. Commission rates are negotiable and not fixed by law, so you can discuss lower rates directly with your realtor depending on market conditions and the specific circumstances of your transaction.
Q3. How much commission do you earn on a $10,000 sale at 5%? On a $10,000 sale with a 5% commission rate, you would earn $500 in commission. This is calculated by multiplying $10,000 × 0.05 = $500. However, remember that this amount would typically be split with your broker according to your agreed-upon split arrangement.
Q4. What happens to the commission after it's calculated? After calculating the total commission, it's typically split 50/50 between the buyer's agent and seller's agent. Each agent then splits their portion with their brokerage according to their individual agreement, which commonly ranges from 50/50 to 80/20 splits depending on experience level and brokerage structure.
Q5. Do commission rates vary by property type and location? Yes, commission rates vary significantly based on property type, location, and market conditions. While the national average is around 5-6%, luxury properties often have lower percentage rates (like 2.5%), and rates tend to be lower in the Northeast, California, and Pacific Northwest despite higher home prices in those regions.
References
- FastExpert – Real Estate Agent Commissions by State
- Colibri Real Estate – Average Real Estate Commission
- VanEd – Standard Realtor Commission
- Indeed – Commission Split with Broker
- Opendoor – Who Pays Real Estate Commission
- Better – Who Pays Realtor Fees
- Federal Reserve – Broker Compensation Trends
