A real estate agent is a vital part of your home-selling process. From listing your home up until closing, an agent is there at every step along the way to help you be successful in selling your home. And in return, the agent will receive a commission on the sale.

If you are getting ready to sell a home and are unsure of how real estate commission works, here are some answers to the questions you may have.

What is real estate commission?

Simply put, this is how your real estate agent gets paid. Commission for both the listing agent along with the homebuyer’s agent is typically based on percentage of the home’s final selling price. The commission covers many services agents provide during the selling of a home, all of which they will front the money for. This includes but is not limited to:

• Listing your home
• Taking photos of your home
• Staging your home
• Scheduling open houses
• Making price recommendations
• Discussing scenarios after receiving an offer
• Handling negotiations
• Coordinating and attending your closing

How much is the real estate commission?

Real estate commission averages between 5 and 6 percent of the home’s final sale price. For example, a 6 percent commission on a $250,000 home sale would be $15,000. The agent and home seller agree on the percentage amount when they sign a contract to work together, known as the listing agreement. It is important to remember that commission rates can vary from market to market.

This percentage is split between the seller’s agent and buyer’s agent. That is then usually split between your agent and their licensed broker, with up to 50 percent going to the broker. So, if the commission rate is 5 percent, in the end, an agent could receive 1.25 percent of the final sale price.

Who pays the commission?

Typically, this falls on the seller (in return, the homebuyer typically covers closing costs) and comes from the proceeds of the home’s sale. However, this can vary from deal to deal. A motivated buyer may offer to cover some of the commission to make the offer on the home more appealing. Also, some sellers list their home at a higher price to help offset the commission cost.

Can you negotiate commission?

Yes, real estate commission rates are negotiable. There are no laws that set commission rates. You may find an agent who is willing to lower the commission fee to obtain the listing if your home is in a hot housing market or is set to sell at a higher price. And, worst case scenario, the agent will be unable or unwilling to accept a lower commission.

Some agents offer to work for a flat rate. This can be an attractive option as it will lower your costs. However, it comes with limited representation. If you think this is the route for you, make sure you know what the fee covers.

What happens if your home does not sell?

If your agent is unable to find a buyer, you may not have to pay commission. It is important to remember this all depends on what you agreed upon with your agent. Your listing agreement will most likely have a specified period, typically 90 to 120 days, that the agent must sell your home within. Even if they do all the work and cannot sell the home, they will not receive commission.

However, there are some situations where they will get the commission, such as if an agent finds a buyer before the end of the contract but closing doesn’t happen until after the listing agreement’s specified period. Additionally, there are situations where you may owe some fees, such as if you decide to pull the home off the market before the date listed in your listing agreement. In that scenario, you may owe for some of the expenses experienced by the agent. Always read the details of your listing agreement to know if and how much you owe your agent.

Your agent puts in a lot of time and effort to help you sell your home, and their reward is their commission. By better understanding what real estate commission entails, you may better appreciate the work they do.