Real Estate Commission Calculator | Paperless Pipeline (2024)

What is a free real estate commission calculator?

Real estate commissions can be tough to calculate. Complex structures, agent fees, and varying rates make figuring them out a time-consuming process. It’s easy to put these calculations on the back burner and focus on other parts of running your brokerage.

But it’s essential to keep on top of how much you owe. Knowing the amount you need to pay agents well in advance helps you make better financial projections, ensuring payday has no surprises.

You could calculate commission manually. But if you want an easy-to-use shortcut, try our free real estate commission calculators. They will tell you exactly how much to pay your agents for each sale they get over the line.

We have created two real estate agent commission calculators. They help with both split and tiered commission structures—these are the payment plans used by the majority of real estate brokerages and agents.

Calculate a Standard Commission Split

A common agent/broker commission split is 70/30. In this case, 70% of the commission on a sale goes to the brokerage and 30% to the agent.

Imagine an agent makes a sale worth $420,000. Of this selling price, 3% (or $12,600) goes to the selling side.

In a 70/30 split, the agent would receive $3,780 and the brokerage would get $8,820.

Then the agent’s fees would come off their commission. Let’s say they are $300. The agent’s final commission is now $3,480, while the brokerage gets $9,120.

Figures You Need to Know

There are four main figures you must know when calculating a standard split commission.

These are:

• 1.Selling price: The amount the property sells for. All other calculations are based on this figure.
• 2.Commission percentage: The percentage of the selling price that each side of the transaction receives. Typically 3% goes to the side representing the buyer and 3% to the seller. The exact amount varies depending on your agreement with the client. If your brokerage represents both sides, you’ll receive both cuts.
• 3.Agent commission rate: The percentage of the total commission that goes to the agent. Agents often receive different commission rates depending on experience or market conditions.
• 4.Agent fees: Some brokerages require real estate agents to pay fees to cover costs like E&O insurance and marketing. How much you charge will depend on your agreement with the agent.

Once you know all the above figures, you can calculate how much you need to pay the real estate agent for each sale.

Calculate a Tiered Real Estate Commission

Tiered commission structures are when the agent receives a different percentage of the total commission depending on how much they earn in a specific period.

This type of structure incentivizes real estate agents to make more sales by giving them a larger piece of the pie when they do so.

But they are more complicated than split commission structures. This is because the amount of commission the brokerage pays the agent changes once the agent hits a predefined threshold.

Here’s an Example of a Tiered Commission Split

The agent and the brokerage could have a deal whereby the agent earns 80% of the total commission for the first $20,000 in commission they earn in a quarter. They may then earn 90% of commission for anything above this in the same period.

Say the agent had a productive quarter and bought in real estate commissions worth $29,000. Their take-home amount would be $24,100. That works out at $16,000 (80% of $20,000) plus $8,100 (90% of $9,000).

It’s easy to see how this type of commission structure motivates real estate agents. If the agent was on a flat fee commission structure of 80%, they would only have earned $23,200. That’s almost $1,000 less for the same amount of work.

Challenges When Calculating
Tiered Commission Splits

The biggest challenge in calculating tiered commission is when a property takes the agent over the edge into the next commission level.

In this situation, calculate how much of the commission qualifies for the pre-threshold rate, and how much qualifies for the post-threshold rate.

You’ll also need to consider the agreement you have with each agent, as this will often vary depending on their experience and needs.

Another complicating factor is that these calculations are typically only used a few times a year when agents hit their targets. This means brokerages may not have much experience calculating them.

Metrics You Need to Know

As well as the metrics listed in the flat fee commission structure section of this article, you also need to know:

• The percentage of total commission the real estate agent receives on each tier.
• The total amount they need to earn to reach the next tier.
• The total amount they have already received from prior sales.

You can use transaction management software alongside the real estate commission calculator to track the number and value of sales each agent makes.

Consider Other Factors When Calculating
Real Estate Commissions

You may need to consider other fees paid to third parties when using the real estate commission calculator.

Here are some of these fees. We’ll also explain how to take them into account when using the commission calculator.

Referral Fees

Brokerages may set up partnerships with other brokerages to refer clients in exchange for a percentage of the sales commission.

This will often happen when a seller moves to a new area and is looking to buy a home. If the selling brokerage doesn’t have a presence in that area’s real estate market, they can recommend one that does.

Brokerage referral fees are typically taken out before the commission is split between the brokerage and the agent. However, this will depend on the exact deal you have set up with the referring brokerage.

Franchise Fees

Major brokerages often charge a “franchise fee” on sales made by franchise brokerages. Like referral fees, this is typically taken out before the commission is split between the broker and the agent.

Consider Various Real Estate
Commission Models

Our real estate calculators are designed to work with split and tiered commission structures.

But these aren’t the only payment structures that brokerages use. Our tools can also help with commission structures like team splits and flat-fee models.

Using the Calculators with a Flat Fee Model

In a flat-fee model, real estate agents keep the entire commission. Instead of paying commission, they pay a flat monthly desk fee to the brokerage. This doesn’t change, whether they sell zero properties or ten.

This type of structure is beneficial for experienced real estate agents who don’t need much help generating leads or making sales. The lack of commission provides far more earning potential.

This structure can also benefit brokerages. They get a guaranteed and consistent income no matter how their agents perform. It may also attract more experienced agents.

Here’s how to calculate flat fee percentages using our commission calculator:

• 1.Set the agent commission rate at 100%
• 2.Enter the total amount of sales the agent put through in that period
• 3.Add the flat fee to the “Agent Fees Owed” field

Following these steps will show you exactly how much you need to pay the agent. If the agent pays the desk fee in advance, you won’t need to make this calculation.

Using the Calculators with a
Team Split Commission Model

Brokerages that use a team split model share out the commission between everyone who works on the deal, not just the agent.

While this can see the agent take home considerably less per deal, the benefit is that the team can push more deals over the line. Many real estate agents make more money due to the higher volume of sales than they would if they worked independently.

Team splits add an extra layer of complication to the way real estate commissions are calculated. Typically the brokerage takes a cut first, and the rest is split between the agent and the team.

To use our tools to calculate a team split, we’d recommend that you use the standard split calculator to see how much the brokerage takes home and then manually calculate how the remaining income is split between the team.