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Real Estate Commission Calculator for 2025
Use the real estate commission calculator below to help determine the commission due to your buyer’s or seller’s agent.
Still, many factors go into making the right estimations, and access to the right financial advisory service can make all the difference for a busy medical professional.
Here’s what you need to know about calculating realtor fees and estimating your net proceeds both as a seller and a homebuyer.
Key Takeaways
- Real estate commissions are typically 5%-6% of a home’s sale price, split between agents.
- Sellers traditionally paid commissions, but new rules now allow buyer negotiations.
- Factors like referral fees, franchise fees, and special agreements impact commissions.
- Commission rates are negotiable, and using a calculator can help estimate costs.
Calculating Your Real Estate Commission
There are two ways to calculate how much commission your real estate agent is due. You can use an online real estate commission calculator (like the one above) or calculate it manually.
To calculate it on your own, the first step is to multiply the purchase price by the commission percentage.
The formula is expressed as:
You have to convert the commission percentage to a decimal format before proceeding with your calculation. Here’s a more practical explanation.
If the real estate agent rate, for instance, is 4.5%, and the property was purchased for $300,000, calculating the commission would look like this:
What Makes up the Real Estate Commission?
The precise breakdown of the real estate commission can vary based on the arrangements you have in place with realtors. Typically, the fee is split between:
- The buyer’s agent
- The buyer’s broker
- The seller/listing agent
- The seller’s broker
The buyer and seller agents split the realtor commission equally, which, in turn, they split with their respective brokers based on a pre-agreed formula.
Real estate agents aren’t paid salaries; their earnings rely entirely on the commissions they receive from clients upon completing a real estate transaction.
Before a property is sold, you must first agree on realtor commission fees. In cases where a broker and their agent are involved, you can negotiate separately with both to determine the real estate fees.
Then, they can work out a formula, typically 60%-40% or 70%-30%, and share the commission between them.
Related: How much do real estate agents make?
Calculating Gross Property Sale Amount
The gross property sale price is the cost of your home minus other deductions like taxes and real estate agent charges. The agent’s commission is based on this gross amount, not the final profit from the seller after mortgages or other liens are paid off.
For instance, if your property is worth $200,000 and you’ve agreed on a 5% commission rate, applying the formula outlined above means that the realtor’s commission will be $10,000.
But it doesn’t end there. Like all earnings, taxes also apply to commissions. In this case, you’ll have to consider varying state tax rates. For example, if the property involved is situated in Missouri, a tax levy of 4.22% must be factored in.
You’ll then have to multiply this percentage (after decimal conversion) by the agent’s commission. Per the instance highlighted above, this is calculated as:
Calculating Net Proceeds
As a seller, calculating your net proceeds involves deducting all other costs, including your agent’s commission, from the home’s sale price.
For example, in a real estate transaction involving property sold for $400,000, where the real estate agent commission was $16,000, your net proceeds would be:
The Commission and the Final Sale Price
An important point to note when determining the finer points of the real estate commission is that the fees are included in the property’s final selling price. For the seller, this reduces the net proceeds from the sale.
If, for instance, you sell your home for $500,000, and the total commission negotiated sums up to $15,000, your net profit will be $485,000.
Buyers’ agent fees are factored into the final selling price. Closing costs include origination fees (in the case of loans), homeowners insurance, transfer taxes, and home inspection fees.
Who Pays the Real Estate Commission
Traditionally, the sellers paid the real estate commission, which meant roughly 5% to 6% of the final sale price to their and the buyer’s agent.
This practice favored realtors, specifically the seller’s agent, who could be incentivized to offer listed property to those who would pay the biggest commissions.
In a landmark legal ruling in 2024, this practice came to a halt, with the National Association of Realtors revising its guidelines to level the playground for all parties involved.
To this effect, it was agreed that:
- As was the former practice, listing agents would not be allowed to publish compensation offers for buyer agents on multiple listing sites.
- Buyer agents with access to multiple listing sites would require separate contracts with the homebuyer, specifying their compensation and the duration of the agreement.
Today, the real estate commission is typically paid by both sellers and buyers, who settle their respective agents. Sellers can still pay the entire commission, but it’s no longer obligatory.
The main implication of this rule change is that negotiations over the commissions going to the buyer’s agent have become more common.
Factors to Consider When Calculating Real Estate Commissions
Whether you’re using a free online real estate calculator or doing the calculations manually, there are a few factors to consider.
Apart from the negotiated commission rate and the sale price of the property, it’s important to consider these third-party elements of the deal:
1. Referral Fees
If the brokerage involved partnerships with another brokerage to refer clients in exchange for a commission, this fee may have to be factored into the realtor commission.
This arrangement is common when sellers move to a new location and have to buy a home there.
If the selling brokerage doesn’t have a commercial presence in the new location, they may refer the client to a partner broker to facilitate the real estate transaction.
2. Franchise Fees
With major real estate brokerages such as Keller Williams and RE/MAX, special franchise fees may be involved.
Similar to referral fees, the amount is taken from the commission before the remainder is split between the broker and their agent.
These fees are often a set percentage, usually around 6% to 8%. The percentage is taken from the real estate agent’s earnings, reducing their final income from the transaction.
This deduction incentivizes agents to account for these fees when negotiating their commission rates.
3. Special Commission Agreements
Realtor commission models usually have split structures involving brokerages and agents on both ends of the deal. Many listing services use this real estate agent commission model.
It’s also possible to have an arrangement with real estate brokerages where a certain percentage is levied on the first $100,00 of the property value.
A lesser commission is then charged on the remaining amount. This is referred to as a sliding scale.
At other times, the commission involves a pre-agreed flat fee. It can also be a dual agency arrangement, where the same agent represents both the buyer and the seller (which can land you discounted commissions).
Whichever the case, it’s important to note that realtor commissions are entirely negotiable.
Frequently Asked Questions
Are Real Estate Commissions Calculated Based on Net or Gross Sales Proceeds?
Real estate commissions are typically calculated based on the gross sales price of the property, not the net proceeds after deductions for outstanding mortgage balances and closing costs.
How Much Do Realtors Make on a Home’s Final Sale Price
Realtors earn a percentage of the home sale price, which is usually around 5%- 6%. In most cases, this fee is split between the buyer’s and seller’s agents and their respective brokerages. For instance, realtors charging a 6% commission on property sold for $300,000 will earn $18,000.
Is the Real Estate Commission Negotiable?
Yes, the real estate agent commission is negotiable depending on factors like the property value, market trends, and the range of services the agent offers. Sellers and buyers can discuss reduced rates or alternative fee structures with their agents.
Navigate the Complexities of the Real Estate Market
Several factors, including dual agencies, sliding scales, and agent concessions like discounts or rebates, can complicate calculating the total commission due to your real estate agent.
Navigating the finer specifics of real estate transactions can be challenging for medical professionals looking to sell existing property or purchase new homes or property to start a private practice.
The experts at Physicians Thrive have years of experience providing financial advisory services for busy physicians looking to enter real estate transactions and investments for various reasons.
By leveraging our knowledge and services, you can look forward to maximizing the best of your real estate dealings, from handling brokers, agents, and their commissions to legal implications.