How commission splits really work
The short answer
A commission split is the share of a transaction's commission that a brokerage passes to an agent. To compare two offers, read five terms together: the percentage, the amount it applies to, any deductions, the payment trigger and any salary or draw. The percentage matters, but it can only be judged alongside the other four.
A commission split is quoted as one number, but what reaches you depends on several terms read together. This guide shows the arithmetic with invented numbers, then gives you six questions to put to a brokerage in writing before you compare offers.
By House Of Orange editorial. A licensed Dubai real estate brokerage, ORN 49865, at The Opal Tower, Business Bay. About the firm
Key points
- Five terms, read together
- The percentage, the amount it applies to, any deductions, the payment trigger and any salary or draw
- The calculation basis
- The same percentage gives a different amount depending on what it is applied to and which deductions come first
- Worked example, invented inputs
- 50% of AED 20,000 is AED 10,000. 60% of AED 15,000 is AED 9,000. Arithmetic only, not HOO terms
- Six written questions
- Basis, deductions and caps, payment trigger and timetable, tiers, any draw, and pending transactions on leaving
What does a commission split include?
A brokerage receives the commission on a transaction, and the split describes how much of it is passed on to the agent. The same percentage can describe different arrangements, so the number alone does not tell you what you will receive or when.
Read an offer as five terms and compare them together. Each is a separate question, and two offers can only be compared once every one of them is answered.
This guide gives no market percentage, because each offer sets its own terms and we have no verified source for a market figure.
The percentage
The share of the commission that is passed on to you. It is the figure that is easiest to quote, and it means little until the next four terms are known.
The amount it applies to
The commission figure the percentage is applied to, which is the calculation basis. Ask for the calculation shown step by step.
Any deductions
Any proposed charges, the stage at which each is taken, and any cap. Whether a particular deduction is permitted is a contract and legal question this guide does not answer.
The payment trigger
The event that makes the money payable to you, and the timetable the offer states for paying it.
Any salary or draw
Whether a base salary or a draw sits alongside the commission. A draw may be described as an advance against future commission, so ask whether any part can be recovered from you, and on what terms.
What does a worked comparison of two offers look like?
The figures below are invented so the arithmetic is easy to follow. They do not describe any real offer. Step 1 is the assumed brokerage commission available for this calculation, the same for both offers. Step 2 is an assumed deduction taken before the split. Step 3, the amount the percentage is applied to, is step 1 minus step 2, and step 5, the calculated agent share, is step 3 multiplied by step 4. On a narrow screen, scroll the table sideways to see both offers.
| Step | Offer A | Offer B |
|---|---|---|
| 1. Commission | AED 20,000 | AED 20,000 |
| 2. Deduction | None | AED 5,000 |
| 3. Amount used | AED 20,000 | AED 15,000 |
| 4. Percentage | 50% | 60% |
| 5. Agent share | AED 10,000 | AED 9,000 |
What does the example show, and what does it leave out?
In this example Offer A calculates to AED 10,000 and Offer B to AED 9,000, even though Offer B has the higher percentage. The reason is the amount each percentage is applied to: AED 20,000 for Offer A and AED 15,000 for Offer B. The example shows why the percentage and its calculation basis have to be read together.
It does not show that a lower percentage is better. Offer B would match Offer A at a share of about 66.7% of AED 15,000, because 10,000 divided by 15,000 is about 0.667, and a different deduction would change the result again. It also says nothing about whether any deduction is reasonable or lawful.
Timing and any salary or draw sit outside this arithmetic, and they can change which offer suits you. Two offers with the same calculated share can still differ in when the money arrives.
What should you ask for in writing?
Use these questions with any brokerage you are comparing. They are questions to ask, not a description of what firms do and not legal advice.
Ask which document sets each term, and check that the written terms match what you were told. If you are unsure what a clause means, ask a qualified adviser before you sign.
Where you can, ask to speak to an agent who has been paid on several transactions at the firm, chosen by you rather than by the manager, and ask whether payments have arrived as the contract describes.
What amount is the percentage applied to?
Ask for the calculation shown step by step, from the commission the brokerage receives to the amount the percentage is applied to.
Which proposed deductions apply, at what stage, and with what caps?
Ask whether each deduction is taken before or after the percentage is applied, and whether it has a cap. Whether a deduction is permitted is a contract and legal question.
What event makes payment due, and what timetable is stated?
A transfer, the brokerage receiving its fee and a fixed date are different triggers. Ask which applies and how many days follow it.
How are tiers calculated and reset?
If the percentage changes with production, ask what is measured, over what period, when it resets, and whether a higher tier applies to everything or only to transactions above the threshold.
Is any draw recoverable, and on what terms?
Ask whether any part of a draw can be recovered from you, when, and from what.
What happens to pending transactions when the agent leaves?
Ask how a transaction that is agreed but not yet paid is treated, and which document says so.
What if a payment is later disputed?
Which route is open to you if a payment is later disputed can depend on whether your arrangement is employment or contractual. That turns on your own contract, so this guide does not decide it.
The guide on unpaid commission sets out the two routes and its sources, and the guide on leaving a brokerage covers what to check before you resign.
Questions about this
The ones that come up most often, answered without a pitch.
This guide does not give a market percentage, because each offer sets its own terms and we have no verified source for a market figure. To compare offers, read the percentage, the amount it applies to, any deductions, the payment trigger and any salary or draw together.
Put each offer through the same steps: the commission, any deduction taken first, the amount the percentage applies to, the percentage and the payment trigger. In the worked example on this page, which uses invented inputs, 50% of AED 20,000 is AED 10,000 and 60% of AED 15,000 is AED 9,000, so the offer with the higher percentage calculates to less.
It is a different arrangement, not automatically a better or worse one. Ask what the brokerage charges under it, such as monthly fees or per-transaction costs, what those cover, and how long you could meet any fixed charges before your first commission arrives.
The terms you agree set this, so ask for the event that makes payment due and the timetable in writing. A transfer, the brokerage receiving its fee and a fixed date are three different triggers, and each gives a different payment date.
That depends on your contract. Ask whether the brokerage can change the commission terms on its own, with what notice, and whether a change would apply to transactions already in progress.
Read next
Written by House Of Orange, a licensed Dubai brokerage that also recruits agents
House Of Orange Real Estate is a licensed Dubai brokerage, ORN 49865. We publish this because we recruit, and we would rather you put the questions on these pages to us than take our word for anything. If a firm cannot answer them, that is the answer.