How Does Real Estate Commission Get Split: A Comprehensive Guide

Curious about how real estate commissions are divided? This article explains the process of splitting commissions in the US real estate market, providing insights and answers to common questions.

Introduction:

When it comes to buying or selling a property, many wonder how real estate agents are compensated for their services. Real estate commission plays a pivotal role in this process, as it determines how agents are paid for their hard work. In this article, we will delve into the intricacies of how the real estate commission gets split in the United States.

Understanding Real Estate Commission:

What is a real estate commission? A real estate commission is the fee paid to real estate agents for their services in facilitating a property transaction. It is typically a percentage of the final sale price and serves as compensation for the agent's efforts.
How is the commission determined? The commission percentage is not fixed and can vary depending on factors such as location, property type, and market conditions. In the US, the typical commission ranges from 5% to 6%, with 2.5% to 3% going to the agent representing the seller and the same amount to the buyer's agent.

The Split Process:

Hey there, fellow bloggers and real estate enthusiasts! Are you curious about how real estate agents split the commission in the good ol' US of A? Well, you've come to the right place! We're here to spill the beans on this fascinating topic, so buckle up and let's dive in!

First things first, let's talk about what commission splitting actually means. When a real estate agent helps sell a property, they typically receive a commission as compensation for their hard work. However, in some cases, the agent might decide to share a portion of that commission with another agent or a blogger (like you!) who referred the client. It's a win-win situation for all parties involved!

Now, you might be wondering how real estate agents split the commission. Well, there's no one-size-fits-all answer because it can vary depending on the specific agreement between the agents. However, here are a few common ways it can go down:

Referral Fee: The agent who receives the referral from the blogger might agree to pay them a predetermined referral fee. This fee is usually a percentage of the commission earned from the transaction. It's like a little thank you for bringing in the client!
Co-Listing Agreement: In some cases, the blogger

Table of Contents

How are real estate commissions split?

Mar 10, 2023 — Typical commission splits include 50/50, where the broker and real estate agent receive equal sums of money from a commission split, but they

What is a typical commission split?

Typical commission splits include 50/50, where the broker and real estate agent receive equal sums of money from a commission split, but they can also use the 60/40 or 70/30 split options. In these situations, the real estate agents get a larger sum of the money than the brokers.

What is a 70 30 commission split?

A common agent/broker commission split is 70/30. In this case, 70% of the commission on a sale goes to the brokerage and 30% to the agent.

What does 80 20 commission split mean?

Often times, brokerages offer something like an 80/20 split wiith a $16,000 cap. This would mean if a an agent earns $100,000 in commissions they only pay $16,000 to the brokerage implying a 16% split. But if they earned $50,000 they would be below the cap and pay 20%, or $10,000 to the brokerage.

What is the 65 35 commission split?

65/35 commission split until you hit $100k in gross commissions. You get 65%, brokerage gets 35%. After $35k is paid to brokerage, the split is 90/10 and resets annually on your start date on ICA.

The real estate agent compensation rate of ~5% was set by the NAR in 1940.

The 50-50 buyer/seller agent split in 1913.

The cost to transact a home in the US is 200-400% more than most Western nations.

Change is not only coming, but *long* overdue. https://t.co/krjqQOxtHh
— Amanda Orson (@amandaorson) October 31, 2023

What is the most common commission split in real estate?

50/50 Typical commission splits include 50/50, where the broker and real estate agent receive equal sums of money from a commission split, but they can also use the 60/40 or 70/30 split options. In these situations, the real estate agents get a larger sum of the money than the brokers.

Frequently Asked Questions

What is an 80 20 commission split?

The commission split is the fee a brokerage collects from an agent it employs on each real estate transaction. It is typically expressed as a percentage of the gross commission income that the agent receives (i.e. 80%) or as a ratio of what the agent receives versus what the brokerage receives (i.e. 80/20).

What commission do most realtors get?

How much is real estate commission? Typically, real estate commission is 5%–6% of the home's sale price. In most areas, the buyer's agent receives 2.5%–3% in commission and the seller's agent receives 2.5%-3% in commission. This can vary by agent and location.

Is 70 30 split good for real estate?

But 60/40 and 70/30 split agreements are also commonly used in real estate. In these circumstances, real estate agents receive more proceeds than brokers. This could result from the company's size and the number of real estate agents a broker is responsible for managing.

FAQ

Why is there a 70% rule in real estate?: The 70% rule helps home flippers determine the maximum price they should pay for an investment property. Basically, they should spend no more than 70% of the home's after-repair value minus the costs of renovating the property.
What percentage do most realtors charge?: Nowadays, real estate commissions can be negotiated, and they typically run about 5 percent to 6 percent of a home's sale price. The exact terms of an agent's commission vary from sale to sale, and can depend on the region and which firm they work for.