How are real estate commissions typically structured?

Real estate commissions are typically structured as a percentage of the property's selling price. This method aligns the interests of the agent with those of the seller, as the agent's earnings are directly tied to the value of the property sold.

This structure incentivizes agents to negotiate the best possible sale price for the home, as their commission increases with higher selling prices. The standard commission rate often ranges from 5% to 6% of the sale price, although this can vary depending on local market practices and specific agreements between the agent and the seller.

In contrast, a fixed rate for each sale doesn't reflect the varying values of properties, making it less common in practice. Additionally, basing the commission only on the buyer's agent's performance disregards the efforts and contributions made by the seller’s agent, which are crucial in the sale process. Finally, commission-free transactions are rare; real estate agents typically need compensation for their services, expertise, and marketing efforts. Thus, structuring commissions as a percentage of the property's selling price not only incentivizes performance but is also widely accepted and practiced across the industry.