The plain answer
Commission is negotiable, it is agreed in writing before the house is listed, and it comes out of the proceeds at closing rather than out of your pocket up front. Ask for the number in writing and ask what it covers.
People are often reluctant to ask this question directly, which is a shame, because it is a reasonable question and the answer should be simple. Here is how the money works.
Commission is a percentage, and it is negotiable
There is no set rate, no legal rate, and no industry rate. Any agent who tells you the figure is fixed is telling you about their own policy, not about the law. It is agreed between you and the brokerage before the house is listed, and it is written into the listing agreement you sign.
You do not pay it in advance. It is deducted from the sale proceeds at closing, which is why a seller with little equity should work out the net figure before listing rather than after.
Buyer agent compensation is now a separate conversation
Following changes to how buyer representation is handled, whether a seller contributes towards the buyer's agent is negotiated rather than assumed, and buyers now sign their own written agreements with their agents. Ask your agent how they are handling this and what they recommend for your house. It affects your net proceeds, so it should be discussed openly and put in writing.
What else comes out at closing
- Title work and the owner's policy, depending on what is customary and what you negotiate.
- Transfer tax and county recording fees.
- Property taxes prorated up to the closing date.
- Anything you have agreed to pay towards the buyer's costs or repairs.
- Whatever is left on your mortgage.
Before you list, ask for a written net sheet: the likely sale price with every one of those lines subtracted, so you can see what actually reaches you. Any agent should produce one without being pushed, and I would rather show it to you before you commit than after.
What you are paying for
Pricing that is defensible rather than flattering, presentation and photography, exposure on the MLS and the sites that pull from it, showings, negotiation, and management of the inspection, appraisal and closing. In divorce and probate sales it also means keeping two parties or several siblings informed at the same time, and working to an attorney's timeline.
If an agent will not put the total cost in writing before you sign, that tells you something more useful than the number would have.
6 minute read · Written by Holly Marie Thomson, Realtor®