Real Estate Commission Splits Explained
In a standard residential real estate transaction, the seller pays a total commission (typically 5% to 6% of the purchase price). This total commission is divided between the listing brokerage and the buyer's brokerage. Within each brokerage, the commission is split further between the broker and the individual agent.
Let's define the split levels:
1. Co-Brokerage Split: The total commission is split between the Listing Side and Buyer Side (typically 50/50).
2. Broker-Agent Split: Each agent splits their side's commission with their respective brokerage based on an agreed percentage (e.g., 70% to agent, 30% to broker).
The math is formulated as follows:
$$\text{Total Commission} = \text{Sale Price} \times \frac{\text{Total Commission Rate \%}}{100}$$
$$\text{Listing Side Commission} = \text{Total Commission} \times \text{Listing Split \%}$$
$$\text{Listing Agent Net} = \text{Listing Side Commission} \times (1 - \text{Listing Broker Split \%})$$
Understanding these splits is critical for agents projecting their net commission income and brokers tracking company dollar margins.