How to Calculate Brokerage Commission

Sellers typically pay both the listing and buyer's agent commissions.
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You pay real estate professionals for their services when you buy, sell or finance a home. You actually pay a real estate or mortgage broker, and the firm allocates a prearranged portion of that amount to their real estate agent or loan officer as a commission. Before you agree to pay a broker commission, shop among service providers and compare their costs. You can calculate broker commissions as a percentage or a flat-fee dollar amount. Typically, listing brokers charge a percentage of a home's sale price -- about 5 percent to 6 percent -- to sell a home, and split the commission with the buyer's broker.

Step 1

Ask your listing agent how much their broker charges. Each broker is different, but most charge an amount that is considered reasonable and customary for the market and area. For example, if the typical commission for a buyer's agent is 2.5 percent or 3 percent, listing brokers usually charge twice that amount -- 5 or 6 percent -- because the amount must cover both the listing and buyer's agent commissions.

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Step 2

Multiply the commission fee by your home's asking price. For example, if paying a 6-percent commission on a \$200,000 sale price, multiply 0.06 by 200,000. The result is 12,000, or a \$12,000 commission to sell your home.

Step 3

Ask your mortgage broker for the loan origination fee. Federal mortgage disclosure laws require brokers to provide the origination fee within three business days of your application on a Good Faith Estimate. The loan origination fee is the commission you pay the broker for the service of originating, or making the loan. A 1-percent origination fee is typical; however, you can negotiate a lower fee, and higher fees may be subject to caps based on loan type.

Step 4

Multiply the mortgage broker's origination fee, or commission, by your loan amount. For example, if you pay a 1-percent origination fee for a \$200,000 loan, you pay the broker \$2,000.

Tip

Real estate and mortgage brokers may charge commission in the form of a flat fee rather than a percentage of the sale price or loan amount. If this is the case, you can determine the percentage that a flat fee represents by reversing some of the calculations.

For example, a broker charges sellers \$1,000 to input for-sale-by-owner listings in the MLS. A seller wants to find out what percentage of his \$200,000 asking price the fee represents. To calculate this, he must divide \$1,000 by \$200,000, which equals .005. To convert .005 to a percentage, he multiplies it by 100. The broker commission equals 0.5 percent of the home price.

Mortgage broker origination fees make up a portion of your total loan acquisition costs, also known as "points." Each point equals 1 percent of the loan amount.

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