Real estate agents are typically paid on a commission basis, and the basic compensation model for real estate agent commissions has remained fairly consistent for decades. The commission is based on a percentage of the home sales price. Using an example sale:
- A home sells for $200,000 with a 5.5% commission in place, as agreed between the seller and listing broker.
- $200,000 with a 5.5% commission equals $11,000 in total commission.
- Assuming no referral fee payouts and a 50% split offered in the multiple listing service (MLS), the listing broker keeps 50%, or $5,500.
- The same situation would mean that the broker on the buyer side would get $5,500.
- Splits between brokers and agents vary a lot but assuming a commonly used 50% number, each agent from each brokerage would get half the commissions, or $2,750 each.
The split offered in the MLS, meaning the percentage the listing broker will share with the brokerage bringing the buyer, is pretty uniform at 50%. But internal brokerage splits are highly variable and can be set up in several ways:
- Newer agents might be given smaller percentages to offset greater guidance or assistance in getting deals to closing.
- Top producers often negotiate larger splits for themselves.
- Negotiated higher splits generally reflect less advertising support or fewer support services provided by the brokerage.
- 100% commission models offer an agent all commission from sales in exchange for monthly fees for desk space, advertising, and other services.
- Tiered split structures offer lower splits until a certain dollar amount in commissions is reached, then the split to the agent increases, sometimes jumping to 100% immediately.