How are real estate commissions typically structured?

Real estate commissions are most commonly structured as a percentage of the final sale price of the property. This approach is prevalent because it aligns the interests of the real estate agent with those of the seller; the higher the sale price, the greater the commission earned. This structure also incentivizes agents to market the property effectively and negotiate the best possible price for their clients.

Calculating commissions this way is standard practice in the industry because it provides a straightforward and proportional method for compensation based on the result achieved—selling the property at a price that meets or exceeds the seller's expectations. Unlike a flat fee, which wouldn't account for varying property values, or a structure based only on the listing price, which may not reflect the true market conditions upon sale, a commission based on the final sale price ensures that agents are rewarded for their performance in closing the deal.