How commission splits really work

What a split actually refers to

The commission on a transaction is paid to the brokerage, not to the agent. The split is the share of that the agent receives, and every argument about pay in this industry is really an argument about the terms attached to it.

So the first question is what the percentage is being applied to. A split quoted against the gross commission and a split quoted against what remains after the firm deducts costs are different arrangements wearing the same number, and the gap between them is not small.

The second is when. A commission is earned at one point, received by the firm at another, and paid to the agent at a third. Firms differ on all three, and the distance between them is where most disputes in this industry live.

The third is what else is in the arrangement. A lower split with a base salary underneath it is a different proposition from a higher one without, and which is better depends on your circumstances rather than on which number is larger.

1. 01

   The percentage

   The share of commission that reaches you. The number every firm leads with, and the one most easily made meaningless by the other three.

2. 02

   The base it applies to

   Gross commission, or net of deductions. Ask which, and ask for the list of deductions in writing.

3. 03

   The payment trigger

   The event that makes the money payable to you, and how many days after it you are actually paid.

4. 04

   What sits underneath

   A base salary, a draw against future commission, or nothing. A draw is a loan against your own earnings and should be recognised as one.

Why a higher split can be worth less

This is the part that costs people money, and it is arithmetic rather than judgement.

Consider two offers. One pays a high share, applied after the firm recovers portal credits, listing costs and marketing spend attributable to you, sixty or ninety days after the agency receives its fee. The other pays a lower share, applied to the gross, on transfer, with the firm carrying the portal and marketing costs.

The second can be worth more in absolute terms and is worth considerably more in cashflow terms, because commission that arrives three months later has to be survived in the interim. For an agent without a buffer, timing is not a secondary consideration; it is the whole question.

None of this makes the first offer dishonest. Both are legitimate models and the first suits an established agent with reserves and their own pipeline. It becomes a problem only when the deductions are not disclosed at the point the percentage is quoted, which is the common case rather than the rare one.

The deductions worth asking about by name

Deductions are not inherently unfair. A firm supplying portal exposure and marketing is paying for something real, and recovering it from the transaction it produced is a defensible model. What is not defensible is discovering the list after signing.

Ask specifically about portal credits and lead costs, because these are the largest and the most variable. Ask about marketing spend on listings you brought in, and whether you are consulted before it is committed. Ask about photography, videography and staging. Ask about administrative or transaction-coordination charges. And ask whether anything is charged against you when a deal fails after costs have been incurred.

Then ask the question people forget: are any of these capped? An uncapped deduction on a variable cost is a share of your commission whose size you do not control and cannot forecast.

Get the list in writing, in the contract rather than in an email, and check that the contract's wording matches the conversation. Where the two differ, the contract is what governs.

Tiers, thresholds and what they are worth

Many firms escalate the split once an agent passes a production threshold, and the structure is reasonable in principle: it pays more to the people generating more.

What is worth examining is the period the threshold is measured over and what happens at its end. A tier that resets annually is a different arrangement from one that ratchets and holds, and an agent who reaches the top tier in month eleven of a calendar-year reset has been paid at the lower rate for almost all of the year that earned it.

Also ask whether the higher tier applies to everything once the threshold is passed, or only to the transactions above it. Both exist and the difference is substantial.

None of this is a reason to avoid tiered structures. It is a reason to model the tier against a realistic view of your own production rather than the one on the recruitment slide, which is usually drawn against the top performer in the office.

What to do before you sign

Read the payment clause and the deductions clause together, because either one alone is misleading.

Ask what happens to a deal that is agreed but has not transferred when you leave. That clause is the single most disputed term in this industry and it costs nothing to read now. It has its own piece in the section on the job itself.

Ask to speak to an agent who has been at the firm for more than a year and has been paid on several transactions. Not the top producer, and not somebody the manager selects for you. What you want to know is whether payments arrive when the contract says they will, which is a question only somebody who has been paid can answer.

And confirm anything you are unsure of with proper advice before signing rather than after. Whether commission forms part of employed remuneration or sits outside it changes which route is open to you if something goes wrong later, and that turns on your specific contract rather than on a general rule.