Which statement best defines the brokers commission in real estate transactions?

• A. A government tax assessed on the sale
• B. A fixed flat fee regardless of sale price
• C. The percentage of the total sales price of the property
• D. The buyer's closing costs

Answer: (C)

The broker's commission is the fee real estate brokers earn for their services in a sale, and it is typically expressed as a percentage of the property's sale price. This means the amount can change with the price of the home rather than being a fixed dollar amount. In most transactions, the listing agreement specifies a rate (common in the 5–6% range), and at closing the seller pays this total, which is then split between the listing broker and the buyer's broker depending on the agreement.

This definition helps explain why the commission isn’t a government tax or a flat fee that stays the same regardless of price. It’s also not the buyer’s closing costs, though those costs are part of what happens at closing. For example, if a home sells for $350,000 at a 6% commission, the total commission is $21,000, typically split between the two brokers.