Commission plans are the financial backbone of every real estate brokerage. Get them right and your agents are motivated, your margins are protected, and your books are clean. Get them wrong and you're doing manual math on every closing, arguing over numbers, and wondering where your money went.
This guide walks through how to structure a commission plan from scratch — the same structure used inside BuyBox CRM — including franchise fees, agent splits, transaction fees, and cap calculations.
The Four Layers of a Real Estate Commission Plan
Most brokerage commission plans have up to four components that apply in sequence. Understanding the order matters — each layer feeds into the next.
1. Franchise Fee (if applicable)
If your brokerage is part of a franchise (RE/MAX, Keller Williams, Berkshire Hathaway, etc.), the franchise takes a percentage off the top of the gross commission. This happens before any split with the agent.
A 6% franchise fee on a $10,000 gross commission leaves $9,400 to be split between brokerage and agent.
Independent brokerages skip this step entirely — your gross commission goes straight to the split calculation.
2. The Agent Split
This is the core of the commission plan — the percentage of the remaining commission that goes to the agent versus the brokerage. Common structures include:
- Fixed split — agent always receives the same percentage (e.g., 70/30 in favor of the agent)
- Graduated split — agent percentage increases as they close more volume (e.g., starts at 60/40, reaches 80/20 after $5M in sales)
- 100% commission — agent keeps everything and pays a flat monthly desk fee instead
For most small and mid-size brokerages, a fixed split between 70/30 and 80/20 in favor of the agent is the most common starting point.
3. Transaction Fee
Many brokerages charge a flat per-transaction fee on top of the split — typically $200 to $500 per closing. This covers administrative costs, E&O insurance allocation, and file review. It comes out of the agent's portion after the split is calculated.
4. The Cap
A cap is the maximum amount an agent pays to the brokerage in a given year. Once an agent has paid the brokerage their capped amount — through splits and transaction fees — they keep 100% of commissions for the rest of the cap year.
Caps are a powerful recruiting tool. They give high-producing agents a clear ceiling on what they owe the brokerage, and they incentivize volume — the more an agent closes, the sooner they cap out and start keeping everything.
A well-set cap aligns your interests with your top agents. They're motivated to close as much as possible before capping, and once they cap, they have zero financial reason to leave mid-year.
A Complete Commission Calculation Example
Let's walk through a full example with all four layers applied:
That $300 transaction fee comes out of the agent's $6,345 split, leaving them with $6,045. The brokerage collects $2,115 from the split plus $300 from the transaction fee — $2,415 total on this closing.
How to Set Your Cap Amount
Setting the right cap number requires knowing your average agent production and your brokerage cost structure. A cap that's too low means you're leaving money on the table from high producers. A cap that's too high means it's meaningless — agents never reach it and it offers no recruiting advantage.
A practical starting point: calculate what your brokerage needs per agent per year to cover overhead, then add a margin. If your fully-loaded cost per agent (desk, MLS, E&O, admin) is $8,000/year and you want a 40% margin, your cap floor is around $13,000. Round up to a clean number — $15,000 is common for mid-size brokerages.
Tracking cap progress
Once caps are in place, you need a way to track how close each agent is to hitting their cap across all their closings for the year. This is where most brokerages still use spreadsheets — and where errors creep in. Every closing needs to be logged, the brokerage's portion calculated, and a running total maintained per agent.
BuyBox CRM handles this automatically. Every time a deal closes and a commission is logged, the system calculates the brokerage's portion, deducts it from the agent's remaining cap balance, and shows both the broker and the agent exactly how far they are from capping out.
Common Commission Plan Mistakes to Avoid
- Applying the franchise fee after the split — it always comes off the gross first, before the split calculation
- Forgetting transaction fees count toward the cap — if your cap tracks total brokerage income from an agent, transaction fees should count
- Not having a written plan — verbal commission agreements create disputes. Every agent should sign a written commission plan before their first closing
- Setting the same plan for all agents — consider tiered plans that reward production; your top agent and a brand-new licensee shouldn't necessarily be on identical terms
When to Update Your Commission Plans
Most brokerages review commission plans annually — typically at the start of the cap year. Common triggers for updates include changes in franchise fee structures, significant shifts in local market commission rates, agent retention issues, or recruiting a high-producing team that requires custom terms.
Whatever changes you make, document them clearly and get updated signatures. Commission disputes are one of the most common sources of brokerage litigation — written agreements are your protection.
Manage commission plans without the spreadsheets.
BuyBox CRM calculates franchise fees, splits, transaction fees, and cap progress automatically on every closing. Free for brokerages up to 3 agents.
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