Both simple and complex commission calculations are easy to get wrong. Brokers are usually honest, but they’re also human--and mistakes do happen. Before you look at your latest commission check and feel like your broker is trying to short you, it’s worth learning more about how the process works.
How commissions work
For commissions, all fees agents earn have to filter through the broker, who is then responsible for determining how the agents below it are paid.
The exact structure of commissions is dependent on the specific broker and the experience of the agent, but usually, the commission percentage is shared with the broker. A brand new agent might see most of that commission remaining with the broker, while rockstar agents might pocket most or all of the fee.
Where it gets really complicated is the fact that commission price is variable, both in terms of property value and percentage.
When you serve as the listing agent, you negotiate with the seller to land on a fee, which is then shared with the listing agent’s broker as well as the buying agent’s broker. As a result, your commission amount has to be calculated each time based on all of these factors.
Read more: How to properly calculate a commission check
Human error is inevitable
The sheer volume of data points involved in complex commissions means that it is not unexpected for errors to occur, even when you work with honest brokers.
Consider all the different calculations that are required for you to manage your own business, then multiply that by however many agents your broker has working under them--it amounts to a lot.
If your broker relies on an outdated method like a series of spreadsheets to calculate commissions, it’s even more likely that an accidental overpayment or underpayment will occur.
All of that being said, if you have concerns about your broker’s ethics, trust your gut (and check their math). Your commission statement should always transparently show exactly what you’re being paid and why.
By leveraging a commission calculator can help reduce these errors, resulting in accurate and fair commissions every time. See ours in action for yourself here.
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