Here is an example of a real estate agents commissions breakdown, allowing for payment of a referral fee, Broker split, transaction fee, overheads and finally taxes.
Note that this is an interactive model – the bold numbers in red are editable – so go ahead and customize the figures to fit your circumstances. Once you are done editing, you may also select the print and/or PDF buttons below:
Sometimes you’ll be lucky if your check is a 1/3rd of the Gross Commission 🙁
Unless you hold your Brokers License and are in business on your own account, you will need to “hang your license” with a Broker of your choice. Back in the good old days you might have expected a 50/50 split with you Broker, but things were different back then, before mega producers and the team concept exploded.
How much is paid out to your Broker in fees and splits depends on your commission and/or cap agreement that you negotiated.
How do Broker real estate agents commissions models work?
Nowadays Brokers come in all shapes and sizes and business models. There are still some that operate on a more traditional basis, but there are also Brokers that offer a 100% split model with their Agents paying desk and transaction fees.
Broker Cap Model
Some Brokers operate a “Cap Model”: Once an agent reaches the cap, future commissions are 100% with probably a transaction fee.
As an example take a broker who recruits an agent with a $25,000 cap and a 75% split. The Broker earns 25% of the agent’s real estate commission, with a limit of $20,000 in total for the year.
Once the agent has paid $20,000 to the broker within the year, they have reached their “cap” – the broker will no longer take 25% on the agents sales for the rest of the year. Note that in some models the agents may still be on the hook for a transaction fee on each sale. Keeping tabs on the amount paid to your Broker is super important so you can forecast your net income.
If you are part of a team
If you’re a member of a real estate team, then you probably have a secondary split with your team owner. This % usually gets rolled into your broker split when the agent receives their commission check.
If you are hired by a Broker the IRS will consider you a statutory nonemployee and will be treated as self-employed for all Federal tax purposes, including income and employment taxes, unless you decide to work with a Broker such as Redfin where agents are employees earning a salary plus commission.
Here in this video clip Jen Bergman explains how her 70/30 real estate agents commissions cap split works with her first 2 buyers sales – 4 months into her new real estate career.
Original video posted to YouTube March 31, 2021.
Jen is with Coldwell Banker in Boulder CO – you can find her here on Facebook.
Which Real Estate Agents Commissions model is best for you?
Which model and Broker you pick will determine your “take home” check on successfully closing a transaction. %’s and caps are not the be all and end all – agents will also need to consider the culture, training, marketing assistance and other perks when choosing which broker to call “home”.