Commission Split Between Brokers and Brokerages
The commission split is the fee that a brokerage pays to an agent on each real estate transaction. The broker’s commission is typically used for office expenses and marketing materials, but it can also go to provide agents with tools and resources that help them do their job better.
Whether you are a new real estate agent or have been working in the industry for years, the broker’s commission is a huge part of your income and success. So, it’s important to know how it works and how you can get more out of it.
First, understand the difference between fixed and graduated splits. A fixed split is a percentage of the commission that an agent gets regardless of their gross income, while a graduated split is a percentage that decreases as an agent earns more.
Graduated splits offer opportunities for agents to increase their earnings by allowing them to reach specific production goals. This can be as simple as graduating from a 50/50 to a 60/40 split. Alternatively, the agent can work toward a higher split like 80/20 or even 85/15.
Capped commission plans are another popular choice among brokers and brokerages. These plans set a dollar limit on the amount of commission an agent can earn, allowing them to keep more of their earnings when they meet that threshold.
Many brokers and brokerages use this system to incentivize their agents to grow their business. It can be an effective way to encourage high production, but it might not be the right choice for your brokerage.
What Is the Commission Split Between Brokers and Brokerages?
It’s best to discuss a commission plan with your broker before you agree to any changes. You need to have a clear reason for requesting higher or lower commissions. You can show your broker hard numbers and facts about your progress in sales, growth, and other areas of the business to convince them that the change is the best thing for the company.
If your broker doesn’t support a higher or lower split, consider trying a monthly fee model. This type of commission arrangement is a lot less expensive than a cap-based structure and allows you to control your costs.
This model also provides a more predictable revenue stream than a cap-based commission scheme. It can be especially beneficial for smaller brokerages or those that are looking to build a strong, long-term brand.
Ultimately, your broker will only agree to a higher or lower commission split if they believe it will benefit the brokerage. This isn’t a legal document, so you’ll need to have facts and figures that support your case for changing the split.
The majority of brokers are willing to negotiate their commission splits if they feel they can make it work for both parties. They are focused on the success of their brokerage, and they need to see that you’re a valuable member of their team.
Ideally, your broker will be able to show you that your increased commissions will lead to more deals and more income. You’ll need to be able to show that you have a strong track record of sales, that you’re a top producer, and that you are actively working on growing your business.