In a real estate transaction, the agents or brokers involved are typically paid by the seller via commission as opposed to a flat fee. Check out our easy-to-use real estate commission calculator below to calculate the commission rates for your deal, and learn more about how this amount is calculated further down the page.
Commission for Each Agent
How the Real Estate Agent Commission Calculator Works
The real estate commission calculator works by calculating a simple equation: The agreed-upon payment percentage/100 x the price of the property. For example, if a homeowner sells their home for $200,000, and the commission rate is 5%, the equation would be (5/100) x 200,000 = $10,000 commission.
It’s important to remember that commission is included in the cost of sale, it’s not an extra fee. In the example above, the seller would actually only receive $190,000 for the home, as the other $10,000 would automatically go toward a commission for the agents/brokers involved.
In some cases, the commission will not be set at an even rate. For example, an agent may charge an 8% commission for the first $100,000 and 4% for the rest. To calculate this uneven rate, you can simply break it into two equations and then add together the results to find the total rate.
- (8/100) x 100,000 = $8,000
- (4/100) x 100,000 = $4,000
- 8,000 + 4,000 = $12,000 total commission
Example of a Real Estate Agent Commission Split Calculator
Calculating the real estate agent commission split is very simple. Typically, the agent/broker representing the seller and the agent/broker representing the buyer will split the total commission 50/50. There are two methods to go about calculating this split rate, which we’ll demonstrate using the example above:
- Take the total commission rate and divide it by two
- (5/100) x 200,000 = 10,000
- 10,000/2 = $5,000 commission for each agent
- Calculate using half of the agreed-upon percentage
- 5/2 = 2.5%
- (2.5/100) x 200,000 = $5,000 commission for each agent
Average Realtor Commission Rate + Market Trends
To ensure you’re getting a good rate, it’s important to have a thorough understanding of your market and keep up to date on industry trends. The average realtor commission rate is typically between 5% and 6%, but recent data shows that this number decreased over the past year due to the Coronavirus pandemic, landing at around 4.8% in 2019.
According to Bankrate, this type of downtrend is typical for slow economic periods. During the real estate boom of 2005-2007, commission rates fell as so many options were available for buyers and sellers. During the Great Recession that followed, commission rates actually went back up as sellers had fewer options and were more willing to pay for the help of agents and brokers.
A similar trend could follow as the U.S. continues to grapple with the pandemic and economic fallout. However, August 2020 data from the National Association of Realtors shows that home sales actually increased by 24.7% compared to July 2020, which is a year over year increase of 8.7%.
In fact, recent data from Clever shows that real estate commission rates may already be bouncing back. They found that the national average for commission ranged from 5.06% to 5.85% in September 2020. It’s important to note that these rates vary widely by location, so check your localized market for more accurate information.
Real Estate Commission Calculator FAQ’s
Below are a few clarifying questions and answers to shed more light on how real estate commission works.
What is a Realtor’s Commission on a Million-Dollar Home?
A realtor’s commission on a million-dollar home would be $30,000, assuming an average 6% commission rate. You can calculate this using one of the methods above:
- (6%/100) x 1,000,000 = $60,000 total commission
- $60,000/2 = $30,000 commission per realtor
Note that this amount will change depending on the agreed-upon commission percentage.
How Much Do High-End Real Estate Agents Make?
According to the U.S. Bureau of Labor Statistics, the top 10% of real estate agents made over $178,000 in 2019. The Balance also writes that “rock star” agents doing millions of dollars in deals per year are most likely millionaires themselves based on commission rates.
Do Realtors Ever Lower Their Commission?
Realtors do lower their commission depending on economic trends. A housing boom will typically correspond with lower commission rates while a recession may lead to higher rates. However, it’s important to note that these are trends on a grand scale. On a personal level, realtors as much less likely to lower their rates for individual clients. According to 2019 data from the Consumer Federation of America, 73% of realtors stated they would not lower their standard commission rate.
Are Commissions Paid on Gross or Net?
Commissions are paid on the gross value of the home. This means that the rate is calculated using the property value before taxes and other fees are deducted from the total amount.
Once you’re finished checking out the real estate commission calculator, head over to our cap rate calculator to learn about this important home valuing metric. And, be sure to visit our rental application and tenant screening pages to learn more about these easy-to-use, fully online tools.