Our real estate commission calculator will calculate your total realtor commission fees and net profit (after closing costs and loan payoff) when selling your home, based on your target sale price.
Real estate agent commissions are usually the largest cost associated with selling a home. The nationwide average commission rate for conventional realtors is 5.49% — approximately $27,450 for a $500,000 home! That total commission is split between the listing agent and the buyer’s agent (yes, the seller covers commission for both agents).
The good news is there are several ways to lower real estate commission costs. This guide — along with our real estate commission calculator — will help you better control your home selling costs so you can maximize your profits when you sell.
You can calculate your real estate commission fees by multiplying the target commission rate (expressed as a percentage) and the target final sale price of the home (expressed in dollars). You apply real estate commission rates to the gross sale price before you subtract other expenses like loan payoff, taxes, and closing costs. Here’s a quick breakdown of how to calculate real estate commission using a 6% commission rate and $500,000 home sale:
- Determine your real estate commission rate. For example, total commission is often 6%. This fee is split by both agents, so each gets 3%.
- Divide the commission rate by 100 (or simply move the decimal point over two places). Using our example, this would give you .06 (or .03 for each agent).
- Multiply the commission rate by the final sale price. If you sold your home for $500,000, you would use the following formula: $500,000 x .06 = $30,000.
- Now you’ve got your total commission in dollars.
Here’s how to calculate real estate commission expressed as a single formula, using the same example:
(6/100) * $500,000 = $30,000
In a conventional real estate transaction, real estate commission works by two real estate agents splitting the total commission from the purchase price as specified in the listing agreement the seller signs with their agent.
- The seller’s agent collects a listing fee for marketing and selling the home.
- The buyer’s agent collects the buyer’s agent fee for bringing a qualified buyer to purchase the home.
Most agents will split the total real estate commission fee roughly down the middle. The nationwide average total commission is 5.49%, but 5–6% is typical nationwide. That means both agents usually take between 2.5–3% of the final home sale price.
Here’s how a 6% total commission might break down with a $500,000 home sale.
Buyer’s agent fee
Total commission paid
*Based on a $500,000 home sale.
Who pays real estate commissions?
The home seller pays the real estate commission fees for both their agent (listing agent) and the buyer’s agent — but most sellers don’t pay these fees directly. Real estate commission fees are typically added into the asking price and taken out of the seller’s net proceeds at closing.
This commission structure makes the deal more affordable for both parties: buyers can cover their agent’s fee with their mortgage instead of out of pocket. And, assuming the seller is netting a profit, the seller won’t have to pay anything out of pocket either.
Why do sellers cover the buyer’s agent commission?
Sellers typically cover the buyer’s agent commission to attract more offers and sell their home faster, higher, and with the best possible terms. It’s considered a marketing expense that will benefit the seller in the long run.
Buyers have to pay a ton of money out of pocket to buy a house: down payment, inspection and appraisal fees, closing costs, and more. For many home buyers, adding another 2.5–3% out-of-pocket fee could price them out from buying a home — or at least disincentivize them in a major way.
Most sellers bake that fee into their listing price, which allows the buyer to cover commission with their mortgage instead. In this sense, the sellers aren’t actually paying the buyer’s agent fee since it’s technically covered by the buyer’s mortgage. But offering to pay the buyer’s agent commission makes their home more affordable to buyers and attractive to buyer’s agents.
Why you should offer a competitive buyer’s agent commission rate
Buyer’s agents usually prioritize homes and showings based on their potential paycheck. By offering a competitive buyer’s agent fee, you’re incentivizing agents to show your home to their clients.
Even in a competitive market, incentivizing buyer’s agents is crucial: you’ll get more bids faster, which increases the odds of a bidding war and a higher sale price — it will also attract stronger offers and better terms. Nearly 90% of buyers work with an agent. If you don’t offer a competitive buyer’s agent commission, it may significantly shrink your potential buyer pool and net you a worse outcome on your sale.
How much do real estate agents actually make in commission?
Most real estate agents make only a small fraction of their initial commission fee. All real estate agents work under and split their commissions with a parent brokerage (think RE/MAX, Century 21, and others).
How much of their commission check they have to share with their broker depends on the following:
- The specific brokerage: different brands offer different commission structures
- Their status and experience level: Newer agents typically have bigger splits (up to 50%)
So, out of a $10,000 listing fee check, a newer agent could realistically only end up with $5,000. And that money still has to cover additional expenses like things paid for during the sale (photography, marketing, gas) and recurring operational costs (licensing and MLS fees, taxes, association dues, and more).
When do real estate agents get paid their commission fees?
Real estate agents get paid their commission checks at or after closing. Commissions are typically deducted from the home seller’s net proceeds when checks are being cut and dispersed by the title company and/or attorneys at the closing table.
It’s common for seller’s agents to collect the check for the total commission then pay the buyer’s agent their portion. Or the title company and/or attorneys may cut two separate checks for both agents.
If the seller ends up owing more at closing than they’re netting on the sale, they may have to bring cash to closing and pay the agents directly.
District of Columbia
Knowing how to save on real estate commission comes down to understanding your options. While the nationwide average total commission rate is 5.49%, here are two ways you can pay less than that.
- Hire a low commission real estate company: The savings can be legit, but not all companies are created equal—choose carefully.
- Try to negotiate with a conventional realtor: Although this is possible (especially in the current hot seller’s market), it’s really difficult. Don’t expect a massive rate reduction if you go this route.
Hire a low commission real estate company
There’s a wave of new real estate brands offering the same listing services as conventional realtors for as little as 1% vs. the typical 2.5–3% fee. Although the percentage difference is small, this can add up to thousands of dollars in savings for home sellers. Different companies create these savings in different ways:
- Full-service discount brokerages, like Redfin, use technology and team-based service models to lower operating costs and create savings.
- Some agent-matching services, like Clever Real Estate, match you with local realtors from top brokerages (think RE/MAX, Coldwell Banker) and pre-negotiate lower rates for you.
At a glance: Top low commission real estate companies (nationwide brands)
*Avg savings compared to 3% listing fee at four price points: $100k, $250k, $500k, $750k
Try to negotiate a lower commission rate with a conventional realtor
You can absolutely negotiate real estate commission rates with conventional realtors. But it can be difficult — and even a bit stressful. You’ll have to negotiate with a professional negotiator, which isn’t very fun to do (at least for most people). And don’t expect a major price reduction — fractions of a percentage point are more realistic.
This is where agent-matching services like Clever and Ideal Agent can offer serious value: they have more leverage (a recurring source of new business for real estate agents at no upfront cost) to negotiate lower rates for you. For example, a one-off deal for a 1% fee doesn't make sense for an agent. But five 1% deals a month start to change the margins and make a big impact on the agent’s overall revenue.
- Calculate your real estate commission fees (F) in dollars by dividing the commission (C) percentage by 100, then multiplying it with the home’s sale price (P).
- Formula for calculating real estate commission:
- Total commission includes fees for two agents: the listing agent fee and the buyer’s agent fee.
- Sellers typically cover both agent’s commission fees out of their sale proceeds (not out of pocket).
- The nationwide average commission rate for conventional realtors is 5.49% — but that varies by agent or brokerage, home value and type, and local market trends (5–6% is typical).
- If you’re looking to save on commission, we recommend checking out a free low commission real estate brand like Clever Real Estate. Clever pre-negotiates lower rates with agents from top brokerages like Keller Williams, Century 21, RE/MAX, and more.
- You can also try negotiating commission rates with realtors on your own, but it will be harder to get a significant rate reduction.
Our tiered commission calculator provides five tiers to calculate a sliding scale commission.
Some discount and conventional brokerages and agents are adopting tiered commission structures (sliding scale) to offer more flexibility and competitive pricing for home seller clients — particularly those with more expensive homes.
Instead of a set percentage, the rate decreases as home values increase. After all, selling a $200,000 home is roughly the same amount of work as selling an $800,000 home. But a set 3% commission model means the agent is making much more commission on the $800,000 home — and potentially not making enough to even cover their marketing costs on the $200,000 sale.
Charging a slightly higher rate for less expensive homes ensures the agent nets a decent profit for their work. And lowering the rates for higher price homes ensures the agent isn’t being overcompensated.
National Association of Realtors. "2021 Profile of Home Buyers and Sellers." Accessed May 11, 2022. Updated 2021.