When a home sells, the commission does not go entirely to one agent. It passes through a series of splits before reaching the individual agent's pocket. Understanding how commission splits work helps buyers, sellers, and agents know what to expect.
The Traditional Commission Structure
Historically, real estate commissions in the US ran around 5–6% of the sale price, paid by the seller, and split between the listing agent's brokerage and the buyer's agent's brokerage. A 6% commission on a $400,000 home is $24,000 total.
In 2024, the National Association of Realtors settlement changed how buyer's agent compensation is disclosed and negotiated, making the structure more variable. Buyers and sellers should discuss compensation terms explicitly with their agents rather than assuming a standard rate.
The Brokerage Split
Each agent works under a licensed brokerage, and the brokerage takes a portion of every commission the agent earns. Common brokerage split structures include:
Percentage split (traditional): The brokerage and agent divide the commission by a fixed ratio, such as 70/30 (agent keeps 70%, brokerage takes 30%) or 60/40. New agents typically start at lower splits (50/50) and negotiate better terms as they build production volume.
Cap model: The agent pays the brokerage a percentage of each commission up to an annual cap (e.g., $16,000/year). Once the cap is reached, the agent keeps 100% of commissions for the remainder of the year. Common at franchises like RE/MAX and Keller Williams.
Flat monthly fee (desk fee): The agent pays a fixed monthly fee to the brokerage in exchange for keeping nearly all commission income. Common at 100% commission brokerages.
A Full Example
A $500,000 home sale with a 5% total commission and a 70/30 agent/brokerage split on each side:
- Total commission: $25,000
- Split between listing brokerage and buyer's brokerage: $12,500 each
- Listing agent split (70%): $12,500 × 0.70 = $8,750 to the agent
- Buyer's agent split (70%): $12,500 × 0.70 = $8,750 to the agent
Out of $25,000 in commission, each agent receives $8,750 before taxes and business expenses.
Agent Business Expenses
The agent's net income is lower than their split suggests, because agents typically pay:
- Self-employment taxes (15.3% on net earnings)
- Marketing and advertising costs
- MLS dues and NAR fees
- E&O insurance
- Transaction coordinator fees
- Signs, lockboxes, and photography
A $8,750 commission split might net an agent $5,000–$6,000 after expenses and taxes, depending on their business setup.
Referral Fees
When an agent refers a client to another agent (common in relocation or out-of-area situations), the referring agent receives a referral fee, typically 25% of the receiving agent's commission. This is paid by the receiving agent, further reducing their net.
Negotiating Commission
Both commission rates and splits are negotiable. Sellers increasingly negotiate total commission rates, particularly for higher-priced properties or in competitive markets where multiple agents are competing for the listing. Agents with strong track records and high production volume have more leverage to negotiate favorable splits with their brokerages.