How Commission Splits Work

In real estate and some other sales roles, a single commission is shared several ways before any of it reaches you. The order of the steps matters, so it helps to work through them one at a time.

Step 1: The total commission

Total commission = sale price × commission rate

A $450,000 sale at 5% produces a $22,500 commission.

Step 2: Your side

When two parties share the commission, such as the agents representing the buyer and the seller, each side receives a share. At 50%, your side is $11,250.

Step 3: Referral fees

If another agent referred the client, a referral fee is usually taken from your side before anything else. A 25% referral fee on $11,250 is $2,812.50.

Step 4: Your brokerage split

Your agreement sets how your side is shared with your brokerage. A 70/30 split means you keep 70% and the brokerage keeps 30%.

Step 5: Caps

Some plans cap what you pay the brokerage in a year. Until you reach the cap, the brokerage takes its split. After that, you keep your full side, apart from fees that still apply, until the cap year resets.

Example: $11,250 side, 70/30 split, $16,000 cap with $13,000 already paid. The brokerage’s 30% would be $3,375, but only $3,000 remains on the cap. The brokerage takes $3,000 and the cap is reached.

Step 6: Fees

Transaction, desk, or technology fees come off last. With no referral and a $395 fee, the first example works out to:

1. Your side: $11,250.
2. Brokerage share: $3,375.
3. Fee: $395.
4. You keep $7,480.

What this is not

The amount you keep is still before income tax, self-employment tax, and business expenses. Splits, caps, and fee rules vary by brokerage and team, so use the terms in your own agreement.

Tools

• Commission split calculator: sides, referral fees, splits, caps, and fees in one place.
• Commission calculator: flat and tiered commission on your own sales.