Real Estate Commission Agreement Template

In plain language: Identifies the seller or buyer (principal) and the agent or brokerage by full legal name, and describes the subject property by address and legal description.

Common mistake: Using a broker's trade name instead of the licensed brokerage entity's legal name. Commissions are legally earned by the licensed brokerage, not the individual agent, and misidentifying the party can void the payment obligation.

In plain language: States the commission as a percentage of the final sale price, a flat fee, or a tiered formula, and clarifies the base to which it is applied — gross sale price, net proceeds, or lease value.

Common mistake: Leaving the calculation base ambiguous — e.g., not specifying whether commission applies to the gross sale price or net proceeds after seller concessions. Disputes over a $10,000 seller credit on a 3% commission produce a $300 difference that generates disproportionate conflict.

In plain language: Defines precisely when the commission obligation arises — typically at close of escrow, execution of a binding purchase contract, or the procuring-cause standard — and who must pay if the deal falls through after the trigger.

Common mistake: Defining the trigger as 'when a ready, willing, and able buyer is procured' rather than 'at close of escrow.' Courts in several US states have upheld commission claims on failed deals under the ready-willing-able standard — most sellers do not expect this and it creates significant litigation risk.

In plain language: States whether the broker has an exclusive right to sell, exclusive agency, or open listing, and what rights (if any) the seller retains to sell the property independently without owing commission.

Common mistake: Failing to specify the listing type in plain language. A seller who believes they have an exclusive agency arrangement but signed an exclusive-right-to-sell clause discovers the distinction at closing — and disputes the commission.

In plain language: Sets the start and end date of the agreement, addresses automatic renewal provisions, and states how either party can give notice to terminate.

Common mistake: Including an automatic-renewal clause without capping the number of renewals or requiring written notice to opt out. An agent can effectively lock a seller into a continuous listing relationship they believe ended months earlier.

In plain language: Entitles the broker to commission if the property sells to a buyer who was introduced or shown the property during the listing period, within a defined number of days after expiration.

Common mistake: Setting the holdover period at 180 days or more without requiring the broker to provide a written list of Protected Buyers within a reasonable time after expiration. Without a written list, the clause can reach anyone the seller meets, creating perpetual commission exposure.

In plain language: Authorizes the listing broker to share the commission with a cooperating buyer's broker, states the split percentage, and confirms whether the split is offered through the MLS or by separate written agreement.

Common mistake: Omitting co-brokerage terms entirely, then verbally agreeing to a split at the time of offer. Verbal commission splits are unenforceable in most jurisdictions — the cooperating broker must have a written agreement to pursue payment.

In plain language: Specifies whether disputes go to mediation, arbitration, or court, the jurisdiction and venue, and which state or country's law governs the agreement.

Common mistake: Choosing arbitration without specifying the administering body or its rules. Courts have refused to enforce arbitration clauses where the chosen forum is undefined, defaulting the dispute to litigation — the more expensive outcome the clause was meant to avoid.

In plain language: Outlines the specific services the broker is obligated to provide — listing on MLS, marketing activities, open houses, offers presentation — and confirms the broker's license is in good standing.

Common mistake: Listing duties in vague terms like 'best efforts marketing.' Without specific deliverables, sellers cannot establish a breach when the broker underperforms, and agents cannot demonstrate they fulfilled their obligations in a commission dispute.

In plain language: States what the seller or buyer must do to support the transaction — providing access, disclosures, and accurate information — and prohibits the principal from circumventing the broker to avoid commission.

Common mistake: Omitting the non-circumvention obligation. Without it, a seller can accept an offer directly from a buyer the broker introduced, then argue the broker was not the procuring cause — triggering an expensive and uncertain dispute.

A real estate commission agreement is a legally binding contract between a property owner or buyer (the principal) and a licensed real estate broker that defines when commission is earned, how it is calculated, and when it must be paid. It establishes the broker's right to compensation for procuring a buyer, seller, or tenant and protects both parties by setting clear terms before any marketing or representation begins.

Commission is most commonly expressed as a percentage of the gross sale price — historically 5–6% in the US residential market, though this varies significantly by market and transaction type. Commercial leasing commissions are often calculated as a percentage of total base rent over the initial lease term. Flat-fee arrangements are also used, particularly for lower-priced properties or limited-service listings. Always specify the calculation base in writing to avoid disputes.

In most US states, real estate commission agreements must be in writing and signed by both parties to be enforceable — oral commission agreements are specifically voided by the Statute of Frauds in many jurisdictions. In Canada, provincial real estate legislation typically requires written representation agreements. In the UK and EU, written agency agreements are standard practice and required under most professional regulatory frameworks. Without a signed agreement, a broker's ability to pursue unpaid commission through the courts is severely limited.

An exclusive right to sell entitles the broker to commission regardless of who procures the buyer — including the seller themselves. An exclusive agency listing allows the seller to find their own buyer and sell without owing commission, but any other broker who procures a buyer still triggers commission. Exclusive right to sell is the most common structure for residential listings because it eliminates disputes over who procured the buyer. Most brokers will not accept an exclusive agency arrangement on a standard listing.

A holdover clause entitles the broker to commission if the property sells to a buyer introduced during the listing period within a set number of days after the agreement expires. It protects brokers from sellers who wait out the listing period to sell privately to a buyer the broker found. Holdover periods typically range from 90 to 180 days. Sellers should insist on a written protected-buyer list delivered within 10 days of expiration to limit their exposure to buyers they can actually identify.

The 2024 NAR settlement eliminated the requirement for sellers to offer buyer-agent compensation through MLS in the United States. Buyer-agent commission is now negotiated separately between buyers and their agents, often documented in a Buyer Representation Agreement. Sellers can still choose to offer buyer-agent compensation as a concession, but it must be disclosed outside the MLS. This change makes written commission agreements — particularly buyer-agent agreements — more important than ever, as verbal arrangements are no longer supported by standard MLS practice.

Cancellation rights depend on the agreement's terms and the applicable jurisdiction. Most agreements allow either party to terminate with written notice, but termination does not eliminate the seller's commission obligation for transactions initiated during the listing period or involving protected buyers during the holdover period. Some US states grant consumers a 3-day right of rescission on certain types of service agreements. In Canada and the UK, contract law principles apply — termination for convenience may still trigger a claim for quantum meruit (reasonable value of services rendered) if the broker has already performed meaningful work.

For standard residential listings with a straightforward commission rate and a reputable brokerage, a high-quality template reviewed by an experienced agent is often sufficient. Legal review is recommended when the commission exceeds $50,000, the transaction involves commercial property, the holdover or exclusivity terms are complex, a co-brokerage or referral arrangement is part of the deal, or the property crosses jurisdictions. A real estate attorney typically charges $200–$500 for a commission agreement review.

In a post-settlement market, the buyer's obligation to pay their agent is governed by a signed Buyer Representation Agreement. If the buyer refuses to pay and the seller has not offered to cover buyer-agent compensation as a concession, the broker's recourse is to pursue the buyer under the representation agreement — which is why written buyer-agent commission agreements are now essential before any property is shown. Without a signed agreement, the buyer's broker has no written basis to compel payment from either party.