What’s a Realtor Commission on a Million Dollar House?
Editor’s note: On March 15, 2024, the National Association of Realtors (NAR) announced a landmark lawsuit settlement that will change the way real estate agent commissions are handled in the future. These changes will “decouple” seller and buyer agent compensation. Industry experts predict that this decoupling will likely lower agent fees and give buyers the ability to negotiate commission amounts directly. Learn more.
If you’ve ever wondered what a Realtor’s commission is on a million-dollar house, you might be surprised to learn that the answer is both simpler and more complicated than you’d expect. We’re going to cover the ins and outs of real estate commissions on high-end homes, as well as offer some expert tips on what to consider before selling a luxury property.
And we’re diving straight in.
How does real estate commission work?
On one hand, calculating commission is pretty straightforward in terms of math. The average real estate commission in the United States is 5.8%, with a commission rate of 5%-6% of the sales price being the standard range. For our first example, let’s call it 6% and quickly run the numbers:
1,000,000 x .06 = 60,000
So, if a house sells for a million dollars, a 6% commission would be $60,000. Easy enough!
But this is where things get more complicated because there are usually two Realtors® involved in selling a house — the seller’s agent and the buyer’s agent. In a standard transaction, the two agents will typically split the commission equally.
60,000 ÷ 2 = 30,000
So, in this example, they’ll each earn $30,000. This still sounds like a nice payday, right? And it is! Except there’s one more split on each side, because both of those agents will likely have a brokerage — think of this as a head office — keeping a percentage of their earnings. This number can vary quite a bit, with new agents splitting commissions 50/50 with their brokerage, and highly experienced agents on splits perhaps as high as 90/10 — with the agent keeping the lion’s share.
For our example, let’s say both agents are on a 70/30 split with their brokerage.
30,000 x .07 = 21,000
Variables aside, it’s fair to say that a Realtor’s commission on a million-dollar house is approximately $21,000.
