Investing Assets & Markets Real Estate Investing Understanding Commission Splits for Real Estate Agents By Jim Kimmons Jim Kimmons Jim Kimmons is a real estate broker and author of multiple books on the topic. He has written hundreds of articles about how real estate works and how to use it as an investment and small business. learn about our editorial policies Updated on September 19, 2022 Fact checked by Hilarey Gould In This Article View All In This Article Splitting Commission With a Broker 100% Commission for the Real Estate Agent Referral Fees Franchise Fees Other Compensation Models Frequently Asked Questions (FAQs) Photo: VioletaStoimenova / Getty Images The vast majority of real estate agents are compensated by a broker. They often split the gross commission that the broker collects. While it is possible to collect a 100% commission as a real estate agent, it's not as popular anymore. Either way, it's important to understand how commission splits work, as well as fees, so that you can determine the best way to run your real estate business. Key Takeaways Most real estate agents are paid through a broker with whom they split the gross commission.It is possible for a real estate agent to get 100% of the commission, though it's not as popular as it once was.Remember that there may be fees for referrals or franchises, too. Splitting Commission With a Broker When the commission is split with a broker, the real estate agent takes a percentage of the total. Let's say a house is sold and the gross commission on the property is $12,000. If the broker and agent agreed to a 50% and 50% split, they'd each get $6,000. The percentage split is an amount agreed to by the broker and the agent and usually reflects a number of services and the support the broker provides. It can also reflect the volume of business the agent brings in. It is a negotiated split, and it'll depend on the broker. High-performers will often bring in a ton of business, and so the brokerage may pay them a higher commission. The highest split shouldn't be the criteria for choosing a brokerage, as there are balancing factors. If you need the services and training the brokerage supplies, then it's worth giving up some of the split, as they're paying for it. Some brokerages, especially in hot tourist areas, get major walk-in business. An agent can sacrifice a little split when they can sit back and just let the business come to them. This can also be a high-dollar business. Condos and homes in ski areas and beach destinations are often expensive. 100% Commission for the Real Estate Agent In this compensation model, the agent gets the entire commission. This model can pay 100% to the agent because the agent is paying a "desk fee" or monthly office fee. This can be a significant amount per month, but experienced producers prefer it because their costs are capped while their income is not. Note This compensation model isn't as popular as it used to be, but there are still companies that offer to pay agents 100% of the commission. Just be sure to read the fine print, as there may be fees. Using the example from earlier, with this model, all $12,000 of the gross commission would go to the real estate agent. However, they may have an office fee of $1,000 per month that they need to pay, so they could end up profiting nothing instead from that one sale by the end of the year since the office fee cancels out the commission. Referral Fees Referral fees come "off the top" before the commission is split. The referral is a negotiated percentage paid to another company for sending a client, either as a seller or a buyer. Here's an example of a typical buyer referral. Let's say brokerage A refers a buyer to brokerage B in another state. Using the $12,000 gross commission example from above, an agreed referral fee of 25% would mean $3,000 goes to brokerage A, and brokerage B's agent and broker would split the remaining $9,000. This can also be a referral fee paid after the split. The agent gets the referral, takes their 50% split, then pays the 25% referral fee from that amount: $12,000 x 50% = $6,000 split $6,000 x 25% = $1,500 for the referral free $6,000 - $1,500 = $4,500 for the agent to keep as profit Note A 25% referral fee is pretty standard, though you may see lower or higher fees. Franchise Fees Some of the major franchises charge a percentage fee "off the top" of each commission to their franchisees. This fee would come off the top of whatever amount the broker receives before splitting with the agent. Let's use a 7% franchise fee as an example. If $12,000 was the gross commission, and there was a 7% franchise fee, $840 would go to the franchise and $11,160 would be split between the agent and the broker. If there was both a referral fee and a franchisee fee the franchise fee would come off after the referral fee. So if $3,000 was paid to the broker for the referral, and the broker and agent split the remaining $9,000, the franchise fee would be 7% of the $9,000, or $630. That would leave $8,370 for the agent and broker to split 50% and 50% ($4,185 each). Other Compensation Models With differing models appearing regularly for how brokerages charge their listing and buyer clients, there are many other ways an agent might be compensated...even by a salary. For a new agent, the split negotiated with the broker should be carefully considered based on the services and anticipated prospect leads that will be received. Sometimes a 45% agent share can be better than a 60% share with little business coming from the broker. Some of today's brokerages are providing more web and technology-related services, even shrinking their office space with cloud brokerage. They spend less money on maintaining an office for every agent, and the agents are more mobile. Customer service can be better and documents and communications are handled digitally. Everyone's costs can be lowered and both the brokerage and agent make more money, even with increased commission splits. Frequently Asked Questions (FAQs) What is a fair commission for a real estate agent? Real estate brokers typically charge a fee that is around 5% to 6% of the sales price, such as for a single-family home. This amount is then split with the real estate agent. The fair move is to divide the commission in half, and so 50% would go to the real estate agent. Who pays real estate agent commission? The real estate broker usually charges the fee for the commission to the seller of the property and then splits it with the real estate agent. While the seller usually pays the fee that goes toward commission, it is negotiable and the buyer may opt to pay it if they receive something in return. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Bureau of Labor Statistics. "Real Estate Brokers and Sales Agents:What They Do." Texas Real Estate Commission. "Legal Update Part 2 Edition 9.0." Keystone Realty. "Join Keystone." National Association of Realtors. "Realtor Referral Contract Form." Thacker and Randall Group. "25% Real Estate Agent Referral Program." National Association of Realtors (NAR). "Franchises vs. Independents." U.S. Department of Justice. "Competition in Real Estate: Questions and Answers." South Dakota Department of Labor and Regulation. "Buying and Selling a Home in South Dakota: A Consumer Guide."