Compensation Plans for Real Estate Agents

Quick Takeaways

Agents can be compensated several ways, including
100 % Commission Split Model
Referral Fees From One Brokerage to Another and Agent Split

Source: How Real Estate Agents Are Compensated (The Balance, Nov. 30, 2022)

Real estate has long been a compensation-based industry. While many REALTORS® are compensated using traditional split broker-agent compensation structures, there are many ways that REALTORS® earn a commission for their services in a real estate transaction.

Agent compensation depends on commissions that can be split in a variety of ways with the broker or other agents. In 2022, 42 percent of REALTORS® were compensated under a fixed commission split (under 100%), 19 percent with a graduated commission split (increases with productivity), and 15 percent with a capped commission split (rises to 100% after a predetermined threshold). Sales agents were more likely to use a fixed commission split (44 percent) and a graduated commission split (20 percent) than brokers, who were more likely to use a 100% commission (17 percent). Those with less experience more often had a graduated commission. The median gross income of REALTORS®—income earned from real estate activities—was $56,400 in 2022, an increase from $54,300 in 2021.

Freddie Mac has updated their Short Sale Transaction and Processing Requirements as of 2023 and covers brokers’ sales commissions.

See References for more information.

References

NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.

Compensation Structures for REALTORS®

Correcting the Record: NAR Does Not Set Commissions (National Association of REALTORS®, Mar. 19, 2024)

The National Association of REALTORS® (NAR) does not set commissions – they are negotiable. The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation. That offer can be any amount, including zero.

NAR Member Profile (National Association of REALTORS®, 2023)

The median gross income of REALTORS® income earned from real estate activities was $56,400 in 2022, an increase from $54,300 in 2021. Those who function as sales agents typically reported a median income of $46,300, an increase from $33,800 reported in 2021.

Compensation Plan Basics

The Average Real Estate Broker Salary for Every State (The Close, Jan. 5, 2024)

Real estate brokers generally earn their income from two primary sources: a base salary and commissions. Their income is made up of the incoming revenue of the real estate brokerage. This money comes primarily from a portion of each of the commissions the agents within the office earn. This is commonly referred to as a “split.” A common split is 75-25, meaning that for every property bought or sold, the agent keeps 75% and the brokerage gets 25%.

How Do Real Estate Agents Get Paid? (SmartAsset, May 27, 2023)

Experienced agents could get 100% of the commission. These agents pay “desk rent” to their brokers instead of splitting the commission. Sometimes one or more of the agents also has the additional training and licensing to act as his or her own broker. Then the agent-broker doesn’t have to split his or her share.

The Real Estate Commission: How Much are Realtor Fees? (realtor.com®, Jan. 31, 2023)

Learn from a REALTOR® about how real estate agents are paid and how buyers/sellers compensate real estate agents. The article discusses what the real estate commission covers, what a typical compensation structure looks like for buyers and sellers’ agents, how the buyer/seller splits the compensation, and answers the question “Is a real estate commission negotiable?”

Methods of Compensating Real Estate Agents (The Balance, Nov. 30, 2022)

“Real estate agents are compensated in various ways, so when choosing a broker, understand that the commission arrangement may not be the most important factor. Weigh the services your broker provides to agents, as well as the expected number of prospect leads and their quality.” Understand the different types of real estate compensation structures, including “the Traditional Broker/Agent Commission Split,” “the 100% Commission Split Model,” “Referral Fees from One Brokerage to Another and Agent Split,” and “Percentage Paid to Real Estate Franchise for Business.”

Who Pays the Commission to the Real Estate Agent? (The Balance, Jun. 30, 2022)

“Many home buyers and sellers don't understand exactly who pays the real estate agent involved in the transaction. To understand who pays real estate commissions—whether it's sellers or buyers or both—look at how real estate agents are paid and how they share cooperating commissions.”

Compensation and Short Sales

Short Sale Transaction and Processing Requirements (Freddie Mac, Apr. 1, 2023)

This “Seller/Servicer Guide” outlines Freddie Mac’s guidelines for short sales. “Unless a real estate broker's sales commission exceeds 6% of the Mortgaged Premises sales price, the Servicer must not, as a condition of the Servicer's acceptance of an offer, renegotiate the real estate broker's sales commission to an amount that is lower than the amount that was originally agreed upon between the broker and the Borrower. In the event the sales commission exceeds 6%, the Servicer must renegotiate the commission to limit it to 6% of the Mortgaged Premises' sales price.”

Freddie Mac Standard Short Sale FAQ (Freddie Mac, Jul. 7, 2022)

If there is more than one real estate professional facilitating the short sale transaction, can they split the commission?

Real estate professionals can split the commission among themselves. The amounts will be based on the terms of their real estate brokerage agreement and any applicable real estate laws. Freddie Mac does not dictate how the commission is divided.

eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

Ready-Made Employment Contracts, Letters & Forms (eBook)

What Your CEO Needs to Know About Sales Compensation (eBook)

Beyond 401(k)s for Small Business Owners: A Practical Guide to Incentive, Deferred Compensation, and Retirement Plans (eBook)

Compensating the Sales Force (eBook)

Books, Videos, Research Reports & More

As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.

Center for REALTOR® Financial Wellness (National Association of REALTORS®)

The National Association of REALTORS® is proud to offer members the Center for REALTOR® Financial Wellness, a resource designed to help you understand your financial planning options and prepare for the future, one step at a time.

111 Ways to Justify Your Commission: Value Adding Strategies for Real Estate Agents and Brokers (New York, NY: Kaplan, 2007) HD1382 .L44

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