What Are Splits and Caps in Real Estate?

Alright, if you don’t know what splits and caps are, our newsletter name probably makes zero sense to you. But don’t worry—by the end of this, you’ll be in the know and sounding like a pro at your next happy hour.

So let’s break down two key terms you’ll hear all the time in real estate: splits and caps. These are crucial to understanding how you get paid as an agent, and once you wrap your head around them, you’ll feel like a commission ninja. Let’s get into it.

1. What’s a Split?

A split is just how your commission is divided between you and your brokerage. Every time you close a deal and collect that sweet commission check, your brokerage takes a piece of the pie. How big that piece is depends on your agreement.

Common splits look something like 70/30, where you keep 70% of the commission, and your brokerage takes 30%. There are other variations—like 80/20, 90/10, or even 50/50—depending on your experience, production, and what kind of support your brokerage provides.

Let’s break it down with an example:

• You close a deal where the total commission is $10,000.

• If you’re on a 70/30 split, you get $7,000 and your brokerage keeps $3,000.

So yeah, your brokerage is taking a chunk, but in return, they’re typically giving you office space, training, admin support, and access to leads. The more experienced and successful you become, the better your split can get.

2. How About a Cap?

A cap is like a safety net. It’s the maximum amount of money your brokerage can take from you in a given year. Once you hit that cap, you stop splitting commissions with them and get to keep 100% of your earnings (minus any transaction fees, of course).

For example, let’s say your brokerage cap is $20,000. That means once you’ve paid your brokerage $20,000 from your split in a calendar year, you’ve “capped.” From that point on, you keep all the commission you earn.

Let’s go back to that $10,000 commission example:

• Say your cap is $20,000, and you’ve already paid $19,500 to your brokerage this year.

• You close a deal with a $10,000 commission, and since you’re only $500 away from hitting your cap, you’ll pay your brokerage $500 on this deal and then keep the rest.

• After that, you’ve capped, and the next deal’s commission is all yours!

3. Why Do Splits and Caps Matter?

Understanding your split and cap is crucial because it affects how much money you make, and it can help you plan your year. If you’re in the early stages of your career, a bigger split (like 50/50) might seem like a tough pill to swallow, but the training and support can be worth it. As you build your business and close more deals, you’ll want to hit that cap as fast as possible so you can keep more of your commissions.

4. Different Brokerages, Different Deals

Not all brokerages are the same. Some offer lower splits but give you tons of leads, tech tools, and admin support. Others give you a higher split but leave you to fend for yourself. It’s important to find the right fit for where you are in your career.

For example, a brand-new agent might prefer a brokerage that provides training, mentorship, and marketing support in exchange for a lower split. But if you’re a more experienced agent who can handle your own leads and deals, you might prefer a brokerage that gives you a higher split with fewer frills.

5. Flat Fee vs. Split Models

Some brokerages don’t even use the traditional split model. They might charge you a flat fee per transaction instead. This means that instead of splitting your commission, you pay a set amount—like $500 or $1,000—on every deal. The benefit here is that once you’ve paid the flat fee, the rest of the commission is yours. It’s great if you’re a high-volume agent closing a lot of deals.

6. Running the Numbers

Let’s do some quick math to help put this in perspective. Imagine you close 10 deals in a year, each with an average commission of $10,000. That’s $100,000 in total commission for the year.

• Scenario 1: No cap, 70/30 split

  • You’d pay your brokerage 30% of that $100,000, which comes out to $30,000.

  • You keep $70,000.

• Scenario 2: $20,000 cap, 70/30 split

  • You hit your cap after paying your brokerage $20,000.

  • After capping, you keep 100% of your commissions, so you keep $80,000 of the total $100,000 in commission.

That’s why agents love hitting their cap—it means more money in your pocket!

7. When Do You Hit Your Cap?

This depends on your commission rate and how many deals you’re closing. The faster you reach that magic cap number, the sooner you start keeping all your commission. For high-performing agents, the cap is like a big milestone, because every deal after that is pure profit. So if you’re crushing it in sales, it makes sense to focus on capping early in the year.

Final Thoughts: Splits and Caps Are Part of the Game

Splits and caps are key components of your real estate earnings. The more you understand them, the better you can plan your business, negotiate with your brokerage, and ultimately, take home more cash. Just remember, early on, you might not love your split, but the right brokerage support can be worth it as you learn the ropes. And once you cap? That’s when the real fun (and real money) starts.

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