### How Is Split Commission Calculated in Real Estate?

Author : Emily Clarke | Published On : 30 Apr 2021

Real estate agents and brokers make money by charging commissions on completed property transactions. Agents work under real estate brokers who oversee property transactions. At the completion of a sale, the broker and agent divide the proceeds. Brokers track the financials through a commission reporting system. The commission may be calculated according to a fixed or graduate formula depending on the contract between a broker and agents.

## Fixed Real Estate Commissions

A fixed formula applies a specific percentage to the commission. Typically, an agent receives 60% of the money, and the broker collects the remaining 40%. Fixed commissions may be 50/50, 70/30, or 80/20. The percentage does change whether an agent sells one property or a hundred.

On the surface, a higher percentage for an agent may appear to be the best situation. However, brokers vary in how they charge fees to agents and the amount of support given to agents. A broker who mentors agents and provides sales leads could offer great value even if the split is 50/50 or 60/40. A supportive broker can enable an agent to complete more transactions and ultimately make more money compared to a broker who offers a more favorable commission split but does not provide sales leads.

## Example of a 60/40 Fixed Commission Split

• The transaction involves two agents working for two brokers.
• The home sells for \$300,000 and produces a 6% commission paid by the seller.
• The 6% commission on \$300,000 equals \$18,000.
• Each broker receives half of the \$18,000, or \$9,000.
• Each agent receives from each broker 60% of \$9,000, or \$5,400.