How to Calculate Real Estate Commissions

If you buy or sell a real estate property, you may owe a commission to the brokers involved in buying or selling the property. Commissions are often paid by the seller, and the overall commission is split by the agent who worked on behalf of the seller and the agent who represented the buyer. Learning how commissions work and how they are calculated can help you to determine the cost of your property, or how much you will receive from a sale.

Steps Edit

Part One of Two:

Calculating Common Real Estate Commissions Edit

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Part Two of Two:

Calculating Total Cost of a Sale Edit

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Community Q&A

Commission is a negotiated item so it comes down to what you negotiate with the other party. Generally, a seller will offer a listing agreement to a real estate agent to sell the home at a certain percentage, and within that agreement it will stipulate what percentage goes to the listing agent from the entire amount and what percentage goes to the buyer's agent. It may not be 50/50 but it often is. If two people are trading properties and are using agents, then it will be whatever is negotiated between one seller and their agent and the other seller and their agent because both are selling their properties. In a trade situation though, it would be more advantageous to use an attorney to conduct the transaction. There could be a 1031 exchange involved with trading properties and deferment of capital gains tax as well and potential reduction of any transfer taxes. If the two sellers are just trading properties and not listing it on the open market then an attorney would be a better choice to represent these sellers but if there was already an agent involved in the listing and marketing of the property when the trade ends up occurring and they are entitled to a commission due to the agreement. made, then it typically would be based on the listing agreement in place for U.S. markets. In some markets, the buyers pay for commission.

Take the rate negotiated, for example 5%, divide this by 100 to convert it to a decimal rate, .05, multiply the rate by the purchase price to get the total commission.

Selling price and buyer closing costs are all negotiated, so it really depends on the market. In a hot seller market, selling price is often pushed up and over what the seller was asking for if the seller receives multiple offers, so a buyer paying their own closing costs may not have an effect on the selling price.

$87,000 - $55,000 = $32,000. (0.07% * 55,000) + (0.05% * 32,000) = (3,850)+(1,600) = $5,450.

It depends on the agreed percentage of Real Estate commission. Take the amount of purchase times the percentage of commission. There could also be title company charges that are normally paid by the seller; it just depends on your state. Your Realtor should be able to help you with this, and if you do not have a Realtor for protection, call your title company for help.

Multiply the percent of the commission by the total price. Remember, percent is parts per hundred. For example, if the commission is 5 percent, multiply by .05 (move the decimal place over two spots). Many calculators or phone apps have a percent key, which makes that easy. Example: Price is $40,000, commission 6 percent. Commission: .06 X $40,000= $2,400