Commission
Commission is the fee paid to real estate agents or brokers for their services in facilitating a property transaction, typically calculated as a percentage of the final sale price. The commission is usually split between the listing agent (representing the seller) and the buyer's agent, and is paid from the proceeds of the sale at closing.
Example
“The real estate agent earned a 6% commission on the $500,000 home sale, which was split between the listing agent and the buyer's agent.”
Memory Tip
Think of commission as the agent's 'mission reward' - they complete their mission to sell your house and earn their percentage prize.
Why It Matters
Commission represents one of the largest costs in a real estate transaction and directly impacts the seller's net proceeds from the sale. Understanding commission structures helps both buyers and sellers negotiate effectively and budget for transaction costs.
Common Misconception
Many people believe buyers pay their agent's commission directly, but it's typically paid by the seller from the sale proceeds and split between both agents.
In Practice
A home sells for $500,000 with a 6% total commission, resulting in $30,000 in commission fees. The listing agent receives 3% ($15,000) and the buyer's agent receives 3% ($15,000), both paid from the seller's proceeds at closing.
Etymology
The word 'commission' derives from Latin 'commissio' meaning 'to entrust,' reflecting how clients entrust agents with the task of selling their property in exchange for a percentage fee.
Common Misspellings
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