How is a broker's commission typically determined?

A broker's commission is typically determined by customary practices in the real estate market, especially when there is no prior agreement in place regarding the commission structure. Industry standards influence the rate, and it often reflects the prevailing commission rates in the area for similar transactions. This means that unless the buyer and seller negotiate a specific commission rate beforehand, the broker will likely charge a fee that aligns with these customary practices.

Factors impacting this customary rate can include the specifics of the property, the local real estate market conditions, and the level of service provided by the broker. This understanding highlights why it's common for commissions to vary, as they may be higher or lower depending on market dynamics, but they are generally established based on what is typical in that given market.

It’s also noteworthy that while negotiation can occur post-sale regarding the commission — and although it is possible for individuals or brokers to have personal preferences regarding fees — these methods are not the standard practice for determining commission. Thus, relying on industry customs is the most widespread and accepted approach.