Explained: How real estate agent compensation works
In this article, we’ll explain the five most common ways real estate agents are compensated for their services. Stick around until the end, and we’ll share our commission calculation template.
1. Broker/Agent commission splitMost real estate agents are compensated by a broker. The broker and the agent share the total commission collected from the sale. For example, if the gross amount of commission collected is $15,000, and the broker offers a 50/50 broker/agent commission split, both will pocket $7,500. A real estate agent commission calculator can make these calculations even easier, especially when the split isn’t 50/50.
2. 100 percent commission split In this compensation model, the agent takes home the full commission collected. The agent is entitled to 100 percent of the commission because they pay what’s known as a monthly ‘desk fee’ – and this can be quite significant. Experienced estate agents may prefer this model as it allows them to earn more without upping their expenses.
3. Referral fees on top of the broker/agent split Referral fees are deducted from the gross amount of commission collected before the funds are split between the agent and broker. For example, let’s say $15,000 commission was collected. The referrer may charge $3,000 for sending the agent the client (buyer or seller) – now $12,000 remains. Using a 50/50 split model, the broker and agent would then each earn $6,000.
4. Percentage paid to real estate franchise Some leading real estate franchises charge a percentage fee off the top of each commission. For example, say the franchise charges a 7 percent fee – they would take $1,050 from the $15,000 commission. The agent and broker would then split the remaining $13,950 50/50 or according to their commission split model.
5. Unconventional real estate compensation models There are several other, more unconventional ways estate agents may be compensated, including the following:
Fixed fees – or, in other words, a salary
A base salary plus a smaller commission percentage
Download our real estate commission calculator
Calculating the precise amount you could earn from a sale can be tricky. That’s why we have created an easy-to-use excel template for commission calculation that you can download right here. This template works as both a residential and commercial real estate commission calculator. Get started now.