Commission Splits
Definition
Commission splits refer to the division of the total real estate commission among the listing and selling brokerages, and then between each broker and their respective agents. Commission rates and splits are always negotiable.
Example
A home sells for $400,000 with a 6% total commission = $24,000. Split equally between brokerages = $12,000 each. If the listing agent has a 70/30 split with their broker, the agent receives $12,000 x 0.70 = $8,400.
Exam Tip
Commission split problems require step-by-step calculations. Always start with total commission (Sale Price x Rate), then split between brokerages, then between broker and agent. Some questions work backward—giving agent earnings and asking for sale price. Remember that commissions are always negotiable.
Related Math Terms
Capitalization Rate (Cap Rate)
The capitalization rate (Cap Rate) is the rate of return on a real estate investment based on its expected income.
Property Value (based on Cap Rate)
In real estate, property value can be estimated by dividing the Net Operating Income (NOI) by the Capitalization Rate (Cap Rate).
Percentage to Decimal Conversion
Converting a percentage to a decimal involves dividing the percentage value by 100.
Monthly Interest Calculation
Monthly interest is the portion of the total annual interest that is paid or accrued each month.
Annual Interest Calculation
Annual interest is the total amount of interest charged on a loan or investment over a year.
Calculating Daily Rate
Daily rate calculation involves determining the cost or income per day by dividing the total amount by the number of days in the period (usually a year or a month). This is a fundamental step in proration.
Frequently Asked Questions
Test Your Math Knowledge
Practice with exam-style questions to make sure you can apply Commission Splits and other math concepts.