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
Percentage to Decimal Conversion
Converting a percentage to a decimal involves dividing the percentage value by 100.
IRV Formula
IRV stands for Income, Rate, and Value. It represents the relationship between Net Operating Income (I), Capitalization Rate (R), and Property Value (V).
Net Operating Income (NOI)
Net Operating Income (NOI) is the revenue a property generates after deducting all operating expenses.
Gross Rent Multiplier (GRM)
The gross rent multiplier (GRM) is a quick method for estimating the value of income-producing property by multiplying the property's gross rent by a factor derived from comparable sales. GRM = Sale Price / Gross Rent.
Capitalization Rate
The capitalization rate (cap rate) is the ratio of a property's net operating income to its sale price, expressed as a percentage. It is used to estimate value and compare profitability of investment properties. Cap Rate = NOI / Value.
Net Operating Income (NOI)
Net operating income (NOI) is the annual income generated by an income-producing property after deducting operating expenses, but before deducting mortgage payments, income taxes, and depreciation.
Frequently Asked Questions
Test Your Math Knowledge
Practice with exam-style questions to make sure you can apply Commission Splits and other math concepts.