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Referral Fees vs Commission Splits (Math)

How to understand how a referral fee affects a commission split (with examples). 

Referral Fee

"The Finder's Fee" This is the money you pay to another licensed agent simply for introducing you to a client. It is the cost of getting the business in the first place.

  • In plain English: Another agent says, "I have a client I can't help (maybe they are moving to your town, or you specialize in something I don't). I will hand them over to you, but if you close the deal, you owe me a cut of the paycheck as a thank you."

Commission Split

"The Cost of Doing Business" This is the agreement between you (the agent) and your Brokerage (the company you work for) on how you share the earnings.

  • In plain English: You do the legwork, but your Brokerage provides the brand name, the office, the legal protection, and the insurance. Because they provide that "roof" over your head, they keep a percentage of the commission you bring in.

Quick Summary Table:
Description Example A (50%/50% Broker Split) Example B (80%/20% Broker Split)
Total Gross Commission $12,000 $12,000

Referral Fee (30% off top)

 $3,600 $3,600
Broker Split $1,800 $720
You Take Home $1,800 $2,880