How does the commission structure work in a real estate transaction?

In a real estate transaction, the commission structure is typically designed to incentivize both the seller's agent and the buyer's agent, reflecting a collaborative effort in closing a deal. The total commission paid by the seller is generally pooled and then divided between the agents representing each party. This division is often based on predetermined percentages that are agreed upon prior to the transaction, which ensures both agents are compensated for their respective roles in facilitating the sale.

The rationale behind this structure is to encourage agents to work together and negotiate effectively on behalf of their clients. When agents split the commission, it aligns their interests, as both parties benefit financially from a successful transaction. This fosters a more cooperative environment, ultimately leading to better service for buyers and sellers alike, and can help to streamline the sale process.

In contrast, other options might suggest a more limited view of how commissions are allocated, either focusing solely on the seller or neglecting the collaborative nature of the real estate transaction. The system of splitting the total commission ensures that both sides of the transaction are represented fairly, contributing to a balanced and efficient market.