In real estate, what is a commission?

In real estate, a commission refers to the payment that a brokerage earns as a percentage of the final sale price when a property transaction occurs. This payment is generally calculated based on a predetermined percentage agreed upon between the seller and the brokerage, reflecting the value of the services provided. When the property is successfully sold, the brokerage receives the commission, which may then be shared with the real estate salesperson who facilitated the transaction.

The nuance of this definition highlights the commission as an essential component of real estate transactions, representing both the brokerage's earnings and the compensation for the expertise provided in the buying and selling process. Understanding that the commission relates to the brokerage rather than the individual buyer or seller provides clarity on its role within real estate operations.