Which of the following best describes a commission in real estate?

In real estate, a commission is typically structured as a percentage of the final sale price, which is agreed upon by the seller and the listing agent or broker before the property is sold. This arrangement aligns the interests of the agent with those of the seller, as the agent has a direct incentive to maximize the sale price to increase their own earnings.

When the sale is completed, the commission is calculated based on that pre-negotiated percentage, which can vary based on market conditions, the agent’s experience, and the specifics of the transaction. This method ensures transparency and fairness, as both parties know what to expect.

Other options do not accurately reflect common real estate commission practices. A fixed amount regardless of sale price does not account for fluctuations in property value and could disincentivize agents from seeking higher offers. A bonus added to the sale price is not standard in real estate transactions and can lead to confusion about pricing. Lastly, a fee paid directly by the buyer does not reflect how commissions are usually structured, as in most cases, the seller pays the commission through the proceeds of the sale. Thus, option B provides the most accurate and comprehensive understanding of how commissions typically function in the real estate industry.