What does a real estate commission typically represent?

A real estate commission typically represents a percentage of the final sale price of properties. This structure is commonly used in real estate transactions to compensate agents for their services in facilitating the sale or purchase of a property. By basing the commission on a percentage, agents have an incentive to focus on achieving a higher sale price, which benefits both the seller and the agent. This percentage is usually negotiated before the sale and is agreed upon in the listing agreement or buyer's representation agreement.

In contrast, a flat fee approach is less common and would not align with the traditional understanding of commission in real estate transactions. Similarly, a fee for initial consultations or a retainer fee does not apply to the typical commission structure, as these options are not standard practices for compensating agents in completed transactions.