The commission number on a closing statement is not what an agent takes home. It gets divided between the two sides of the deal, then trimmed by referral fees, franchise fees, the brokerage split and per-deal fees before anything reaches the agent. This guide walks through each step in the order most deals follow.
Commissions are negotiable and every brokerage's plan is different, so treat the numbers here as an illustration and check your own agreement for the real terms.
1. Start with the gross commission
Commission is usually a percentage of the sale price, though flat fees are also used. Multiply the sale price by the rate the parties agreed to. That's the gross commission, and it's paid to the brokerages at closing, not directly to agents.
2. Split between the two sides
A deal has a listing side and a buyer side. The listing agreement sets what the seller pays the listing brokerage. The buyer's agent's compensation is set by a written agreement with the buyer, and the seller may agree to cover some or all of it as part of the deal. Since the 2024 NAR settlement changes, offers of buyer-agent compensation can't be advertised on the MLS, so this is negotiated deal by deal.
If one agent represents both sides where that's allowed, both sides go to the same brokerage. Everything below applies to one side.
3. Fees that come off the top
- Referral fee. If another agent referred the client, they usually get an agreed percentage of your side, often taken before anything else.
- Franchise or royalty fee. Brokerages under a national brand often pay the brand a percentage of gross commission. Some plans take it before the agent's split, some only from the brokerage's share, and some cap it.
4. The brokerage split
What's left is divided between the agent and the brokerage under the agent's commission plan. A 70/30 split means the agent keeps 70 percent and the brokerage keeps 30 percent. The brokerage's share is often called company dollar. Splits are often graduated, moving in the agent's favor as their yearly production grows.
5. Caps and 100 percent plans
On a capped plan, the agent pays the brokerage its split only until they've paid a set amount of company dollar in the year. After that, they keep most or all of each commission until the cap resets on their anniversary date. On a 100 percent plan, the agent keeps the whole commission and pays the brokerage a flat monthly or per-deal fee instead.
Either way, watch for per-deal charges: transaction fees, E&O insurance fees, and technology or desk fees usually come out of the agent's share after the split.
6. A worked example
These numbers are made up to show the math. A home sells for $500,000 and the listing side earns 2.5 percent. There's no referral. The brand takes a 6 percent franchise fee off the top, the agent is on a 70/30 split and hasn't capped, and the brokerage charges a $395 transaction fee.
| Step | Amount | Running total |
|---|---|---|
| Gross commission for the side (2.5% of $500,000) | $12,500 | $12,500 |
| Franchise fee (6% of $12,500) | −$750 | $11,750 |
| Brokerage share (30% of $11,750) | −$3,525 | $8,225 |
| Transaction fee | −$395 | $7,830 |
The agent's take-home from this side is $7,830 before taxes and their own business expenses, about 63 percent of the gross commission for the side. If the same agent had already hit their cap, the $3,525 brokerage share would mostly drop away.
7. Common mistakes
- Budgeting from the gross number. Plan around what's left after every fee and the split, not the figure on the closing statement.
- Applying fees in the wrong order. Whether a fee comes before or after the split changes the result. Follow your plan's order.
- Forgetting per-deal fees. Small fees add up across a year of closings.
- Forgetting taxes. Commission is usually self-employment income with nothing withheld.
- Treating any rate as standard. Commissions are negotiable, and saying otherwise can create legal risk.
8. FAQ
What is a typical real estate commission split?
There is no standard split. Commissions are negotiable, and every brokerage sets its own plan. Graduated splits such as 60/40 or 70/30 in the agent's favor are common at traditional brokerages, while cap and 100 percent models charge a fixed amount or a yearly cap instead. Read your independent contractor agreement for your actual terms.
Is commission split before or after the franchise fee?
It depends on the brokerage. Many franchise brands take their fee off the top of the gross commission before the agent and broker split what's left, but some take it only from the brokerage's share or cap it. Your brokerage's commission plan says which.
What is a commission cap?
A cap is the most company dollar (the brokerage's share of your commissions) you pay in a 12-month period. Once you hit it, you keep a much larger share, often 100 percent minus per-deal fees, until your anniversary date resets it.
Who pays the buyer's agent?
It's negotiated. A seller may agree to pay some or all of the buyer's agent's compensation, the buyer may pay it, or it may come from a concession in the offer. Since the 2024 NAR settlement changes, offers of buyer-agent compensation can't be posted on the MLS, and buyer's agents working with a buyer need a written agreement that states their compensation.
Are commissions taxed?
Yes. Agents are usually independent contractors, so commission is self-employment income. Brokerages generally don't withhold taxes, so agents typically set money aside and pay estimated taxes. Talk to a tax professional about your situation.
This guide is general information, not legal, tax or financial advice. Your brokerage agreement controls your actual split and fees.