How is a "brokerage fee" best described?

A "brokerage fee" is best described as the commission earned by a broker for facilitating a real estate transaction. This fee is typically a percentage of the sale price of the property and is agreed upon in the listing agreement between the broker and the seller. It compensates the broker for their services, which may include marketing the property, showing it to potential buyers, negotiating offers, and guiding the seller through the entire transaction process.

Understanding this concept is vital, as brokerage fees are a critical part of the real estate business model, and they represent the financial incentive for brokers and agents to perform effectively. In a typical real estate transaction, this fee can be split between the seller's broker and the buyer's broker, depending on the agreement made beforehand. Knowing what constitutes a brokerage fee helps clarify the roles and expectations in real estate transactions.