How is the listing agent's compensation determined?

The listing agent's compensation is primarily determined based on the final sales price of the property. This compensation structure aligns the interests of the agent with those of the seller; when the property sells for a higher price, the agent typically earns a higher commission, motivating them to market the property effectively and negotiate the best possible deal. Commissions are usually expressed as a percentage of the sale price and are agreed upon in the listing agreement before the property is put on the market.

Other options, such as a flat fee or compensation determined by the local real estate board, do exist in some contexts but are less common than commission-based structures. The consensus between agents and buyers does not generally dictate an agent's compensation; rather, it is established through contractual agreements made prior to the sale. Therefore, basing compensation on the final sales price is the most prevalent method and reflects the market-driven nature of real estate transactions.