- Using an example deal with a home sold for $200,000 and a 5.5% example commission agreed to by seller with the listing broker
- $200,000 X .055 = $11,000 full commission.
- Assuming no referral fee payouts and a 50% split offered in the MLS, the listing broker keeps 50%, or $5500.
- The same situation would mean that the broker on the buyer side would get $5500.
- Splits between brokers and agents vary a lot, but assuming a commonly used 50% number, agents at the two brokerages would get half the commissions, or $2750 each.
The example is the basic and simple approach and still used with varying split percentages by the vast majority of real estate brokerages. The split offered in the MLS, meaning the percentage the listing broker will share with the brokerage bringing the buyer, is pretty uniform at 50%. But, the splits at brokerages between the broker and the agent are highly variable, and can be set up in a number of ways:
- Newer agents might be given smaller percentages to offset greater help they need in getting deals to closing.
- Top producers often can negotiate larger splits for themselves, including splits up to 90% in some cases.
- Especially with the top producers, there may be negotiated higher splits in return for less advertising or fewer support services provided by the brokerage.
- 100% commission models offer the agent all of the commission in exchange for monthly fees for desk space, advertising and other services.
- Tiered split structures offer lower splits until a certain dollar amount in commissions is reached, then the split to the agent increases, sometimes jumping to 100% immediately.
As independent contractors in the commissioned sales business model, the agent handles their own accounting and business, though the brokerage may pay to advertise agent listings or split ad costs depending on the independent contractor agreement with the agent. While this is by far the model most used in the business, it has its critics. Criticism frequently centers around the lack of training and money spent by brokerages for agent development. It's a business model that makes it relatively inexpensive for a brokerage to take on newly licensed agents, letting them make or break in the business with little cost to the broker. Those who criticize this model also state that this lack of financial support and limited expense for training leaves new agents focused heavily on getting a deal and a commission, and less on learning more and serving clients better.
Go to the next page for other real estate agent compensation models and how they differ.
