Compensation Plans for Real Estate Agents

Quick Takeaways

Agents can be compensated several ways, including a fixed commission split, a graduated commission split (increases with productivity) or a capped commission split (rises to 100% after a predetermined threshold).
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 traditionally been a compensation-driven industry. While many REALTORS® still follow the standard broker-agent commission split model, there are various other ways agents earn commissions in real estate transactions.

Agent compensation often involves commission splits with brokers or other agents, which can take several forms. In 2023, 35% of REALTORS® operated under a fixed commission split (below 100%), 20% used a graduated commission split (which increases with productivity), and another 20% followed a capped commission split (where the split rises to 100% after reaching a certain threshold).

The median gross income for REALTORS® from real estate activities was $55,800 in 2023, a slight drop from $56,400 in 2022. Sales agents reported a median income of $45,000, down from $46,300 the previous year. REALTORS® with 16 or more years of experience earned a median income of $92,500 in 2023—an increase from $80,700 in 2022—while those with two years or less of experience earned a median of $8,100, down from $9,600 in 2022.

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®, 2024)

In 2023, 35% of REALTORS® were compensated under a fixed commission split (under 100%), 20% with a graduated commission split (increases with productivity), and 20% with a capped commission split (rises to 100% after a predetermined threshold). The median gross income of REALTORS® income earned from real estate activities was $55,800 in 2023, a decrease from $56,400 in 2022. Those who function as sales agents typically reported a median income of $45,000, a decrease from $46,300 reported in 2022. REALTORS® with 16 years or more experience had a median gross income of $92,500—up from $80,700 in 2022—compared to REALTORS® with two years or less experience that had a median gross income of $8,100—a decrease from $9,600 in 2022.

Compensation Plan Basics

Compensation, Commission, and Concessions (REALTOR® Magazine, Aug. 13, 2024)

“Agents who are REALTORS® need to understand the new rules to best serve consumers while guiding them through one of the biggest purchases of their lives. While NAR members are immersed every day in discussions about compensation, commissions and concessions, it’s important to review the different ways agents and brokers can be compensated, and how each is—or is not—changing because of the settlement.”

The Real Estate Commission: How Much are Realtor Fees? (realtor.com®, Aug. 19, 2024)

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?”

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%.

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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