How is commission typically defined in real estate transactions?

Commission in real estate transactions is primarily considered a fee paid to the broker for their services, which is typically calculated as a percentage of the sale price. This structure incentivizes the broker to negotiate a higher sale price on behalf of their clients since their earnings are directly linked to the transaction's value. The percentage can vary but is often around 5% to 6% of the sale price, which is then split between the buyer's and seller's brokers.

This approach to commission aligns the interests of both the brokers and their clients, as brokers are motivated to sell properties at the best possible price and to facilitate the transaction efficiently. Unlike other options presented, this definition encompasses the fundamental role of a broker in real estate that entails market expertise, negotiation skills, and transaction management, which justifies the commission being a percentage of the sale price rather than a fixed fee or unrelated service charge.