Scope and assumptions
Illustrative using representative commission rates; actual rates vary and are negotiable. Not real-estate advice.
That 5% a seller hears quoted on a house isn't one fee — it's a rate riding on the sale price, then sliced between two agents. On a $400,000 home it's $20,000 walking out the door, and whether the rate is fixed or negotiable changes how much the seller actually keeps.
The formula
Commission = Sale Price × Rate %
Worked examples
| Sale price | Rate | Commission |
|---|---|---|
| $400,000 | 5% | 400000 × 0.05 = $20,000 |
| $250,000 | 6% | $15,000 |
| $600,000 | 4% | $24,000 |
The split
A 5% total often splits 2.5% listing + 2.5% buyer agent. The seller pays the full percent; it's divided between brokers. The split doesn't change the total the seller owes, only who receives which share.
Net proceeds
Net = Sale price − commission − other closing costs. A 5% commission on $400k leaves $380k before other costs. Title, escrow, and prorated taxes further reduce the final check, so commission is rarely the only deduction.
The rate is negotiable
Unlike a tax, the commission percent is a contract term you can discuss. A 5% on $600k ($30k) is a lot of money, even a half-point reduction saves thousands. Don't treat the quoted rate as fixed.
Commission Splits That Get Miscalculated
Forgetting r is a decimal (5% = 0.05); thinking only the seller pays (the percent comes from the sale price regardless of split); ignoring other closing costs (commission isn't the only deduction); assuming a fixed rate (commissions are negotiable); confusing the split with the total (2.5%+2.5% still sums to 5% of the price); and forgetting it's on the sale price (not on your equity or loan).
Related industry guides
For the rest of the industry cluster, start at the hub: Percentage in Finance Interest. Adjacent: Percentage in Finance Interest and Percentage in Payroll Tax.
FAQ
Can I pay less commission by selling myself? Yes — FSBO avoids the listing agent's share, but you still face the buyer-agent half and the work of marketing/negotiating. The rate is negotiable regardless.
Is the commission taken from my equity or the loan? From the sale price, not your equity or mortgage balance; the percent rides on the full transaction value.
Does a higher sale price mean a lower percent is better? On a bigger price, even a small rate cut saves thousands (0.5% of $600k = $3k), so negotiate harder on high-value homes.
What other percents reduce net proceeds? Closing costs, title, prorated taxes, and any concessions — commission is rarely the only percent off the top.
Who actually receives the commission split? The brokerages (listing and buyer), who then pay the agents per their agreements; the seller pays the full percent to the transaction.
Sources: NAR, Commission facts.
Disclaimer: Illustrative only, not real-estate advice. Rates vary and are negotiable; consult a licensed agent. Informational only.
Sources and references
- NAR — Commission factshttps://www.nar.realtor/
Maintenance and corrections
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