Commission Splits Explained for New Agents

If you choose your first brokerage based on the commission split alone, you will lose money—probably a lot of it.

I have spent over 20 years watching new agents walk into a recruiter’s office, see a “90/10” split on a whiteboard, and start spending the money in their heads. Then reality hits. The "Smiling Recruiter" forgot to mention the $500 monthly desk fee, the transaction fees, and the fact that there is zero training to help you actually get a contract signed.

As you Start a Real Estate Career in California, your biggest risk isn't a low split; it's a high split that comes with no support, leaving you with 100% of zero.

TL;DR: The Bottom Line

• Effective Split > Nominal Split: The "90/10" on the wall isn't what you take home.
• Year 1 is Flight School: You are paying for supervision so you don't lose your license.
• Fees are the "Silent Killer": Desk, franchise, and tech fees can eat 20% of your check before you see it.
• Negotiability: By law, commissions and splits are negotiable; there is no "standard" rate.
• The Goal: Choose the brokerage that gives you the highest probability of closing beyond Deal #1.

Decode the Pitch: The Real Vocabulary

To make a smart decision, you must stop using recruiter jargon and start using mine.

• Gross Commission Income (GCI): This is the total pie. If you sell a $1.2M home at a 2.5% commission, the GCI is $30,000.
• The Split: The first slice. If you are on a 70/30 split, the broker takes $9,000 and your "Initial Share" is $21,000.
• Off-The-Top: Off the top fees are brokerage expenses deducted from a realtor's commission before they receive their share of the split.
• Fees: The silent nibblers. They eat your slice from the edges after the split is taken.
• Effective Split (The King Metric): The net percentage of the GCI that actually hits your bank account.

Kartik’s Rule of Thumb: The Effective Split Formula

To find the truth, use this calculation. "Your Share" is the dollar amount the broker hands you after their split but before they subtract desk fees, insurance, or transaction costs.

Takeaway: A "90% split" often results in a 65% effective split once the monthly "rent" is paid.

The Five Models: Who Are They Really For?

Takeaway: Match the model to your current skill level, not your future ego.

The Fee Menu: What They Charge You For

I once reviewed a contract for a student who was promised an 80/20 split. After we calculated the "menu" below, their effective split was 52%. They walked away. Here is how those fees are usually grouped:

• "The Rent" (Desk Fees): Monthly fees ranging from $50 to $1,000+.

Kartik’s Note: Paying over $200/month for a desk without a documented, daily training schedule is a major red flag when choosing a brokerage.

• Errors & Omissions (E&O): Professional liability insurance. Some brokers charge this annually; others charge a flat fee per transaction.
• "The Franchise Tax": Typically 5%–8%. As mentioned above, this may be deducted "off the top" before the split or calculated into your specific fee schedule.
• Compliance/Risk Management Fee: A per-file fee charged for the broker's staff to review your disclosures and contracts for legal errors.
• The Partnership Tax: If you join a team, expect them to also take a cut. See Should You Join a Team or Go Solo? for the math.

The War Game Scenarios

Scenario 1: The "High Split" vs. The Traditional Partner

Assumption: A $1M sale at 2.5% ($25,000 GCI).

The Logic: If the 60/40 model provides the systems that help you close one deal a month, while the 85/15 model leaves you to figure out lead-gen alone (leading to zero deals), the "lower" split is more profitable over time.

Scenario 2: The Cap Crusher (The Cash Flow Trap)

An agent joins a "Cap" brokerage with a $20,000 annual cap and $800/month in fixed fees.

• The Math: If that agent goes 6 months without a deal, they have spent $4,800 out of pocket.
• The Risk: Most new agents quit by month 7. The "Cap" only benefits you if you have the volume to hit it. For a rookie, a no-monthly-fee 50/50 split is safer than a "100%" model that drains your savings while you're learning.

Scenario 3: The Team Tango (The Double Split)

You join a team on an 80/20 brokerage split. The team takes a 50% split for providing the lead.

• GCI: $10,000.
• Brokerage takes 20%: $8,000 left.
• Team takes 50%: $4,000 left.
• Effective Split: 40%. Is this lead worth 60% of the commission? If they handle the TC, lead gen and the marketing, it often is.

Audit Checklist: Offer A vs. Offer B

Before signing, put both offers side-by-side:

The Interview Playbook: Scripts for the Audit

Don't ask "what is the split?" That's a rookie question. Use these scripts from our guide on How to Interview a Brokerage as a New Agent:

• "Can you provide a written, all-in fee schedule and walk me through the net income on a $1.25M sale?"
• "What is your documented process for a new agent to get an offer reviewed under time pressure on a Sunday night?"
• "If I use a company-provided lead, what is the total effective split after referral fees are deducted?"

The Verdict: What a New Agent MUST Do (Year 1)

For 19 out of 20 new agents, the Apprenticeship/Traditional model is the only logical choice.

I’ve seen too many agents go for a 100% split only to miss a critical disclosure contingency because no one was available to review their file on a weekend. That "saved" commission disappears the moment you're hit with a legal claim.

Year one is about risk mitigation. You need a broker who is financially incentivized to make sure you don't crash. Once you've closed three deals, you have the leverage to look at the Best Brokerages for New Agents in California that offer higher splits for producers.

Takeaway: Buy the education in Year 1 so you can own the market in Year 5.

FAQ: The Blunt Truth

1. Can I negotiate my split?

Yes, but as a new agent, your leverage is low. Focus on negotiating for better tools or waived initial fees rather than the split.

2. What is a "Cap"?

A ceiling on what the broker takes. After you pay them a set amount (e.g., $20k), you keep 100% for the rest of the anniversary year.

3. What is a typical split for a new agent in CA?

Usually between 50/50 and 70/30. Anything higher often indicates a lack of provided leads or support.

4. Is 100% commission ever worth it?

Only if you are a "business in a box" with your own systems, leads, and staff. For a rookie, it's a liability.

5. Do teams take another split?

Yes. Team splits are separate from and usually in addition to brokerage splits.

6. What fees are "normal" in California?

A transaction fee ($250-$500) and E&O insurance are standard. Watch out for hidden "marketing" or "admin" fees.

7. What if the brokerage provides the leads?

Expect a referral fee (25-40%) to be taken before the split is calculated.

8. What is a transaction fee vs. a TC fee?

Transaction fees go to the broker. TC (Transaction Coordinator) fees go to the professional who manages your escrow paperwork.

9. How do splits work on leases?

Often a flat fee or a much higher split (e.g., 50/50) because the dollar amounts are lower.

10. Should I join a high-split brokerage if I'm part-time?

No. Part-time agents need more supervision because they aren't in the office daily to catch changes in law or contracts.

11. Does the split change if I represent the buyer vs. the seller?

Usually no, but check your independent contractor agreement.

12. How do I avoid Red Flags When Choosing Your First Brokerage?

If they talk about the "split" for 30 minutes but can't show you a training calendar, walk out.

The Call to Arms

Your goal is not to find the perfect split. Your goal is to find the first broker who will turn you from a liability into an asset.

The commission split is just one piece of your launch plan. To build your complete, step-by-step career blueprint and avoid the "learning tax" most rookies pay, start here:Start a Real Estate Career in California.