How is a real estate agent's commission typically calculated?

A real estate agent's commission is typically calculated as a percentage of the sale price. This method aligns the incentive of the agent with the interests of the seller, as the higher the sale price, the greater the commission earned. This percentage can vary based on the market, the agreement between the seller and the agent, and the overall commission structure in a given area.

This calculation method promotes a focus on achieving the highest possible sale price for the property and can motivate agents to invest more effort into marketing and negotiating for the seller. In many cases, commission rates are commonly around 5% to 6% of the property's sale price, often split between the listing agent and the buyer's agent.

The other methods mentioned—charging a flat fee, basing commissions on the number of properties sold, or an hourly rate for services—are less common in traditional real estate practice. While there might be scenarios where a flat fee could be used, it doesn't reflect the standard practice where commissions are tied to the sale price, making the percentage model the prevalent standard in the industry.