Real estate commissions: reconcile closings, agent splits, and referral fees

A closing can produce a gross commission, an agent share, a referral payment, transaction charges, and a smaller amount retained by the brokerage. The bank deposit may show only the retained amount or only one part of the settlement. Reconcile the entire transaction before deciding that commission income and payable balances are complete.

Use one closing identifier linked to the property, client agreement, agent, settlement date, compensation terms, and disbursement record. Keep pending and completed transactions separate. A strong pipeline is useful for forecasting, but an expected closing is not the same evidence as a completed transaction and an established right to compensation.

NAR's buyer-agreement guidance states that compensation is negotiable and should be clearly defined in the applicable agreement. Do not apply a presumed standard commission to the sale price. Read the actual flat fee, percentage, hourly arrangement, or other agreed formula and any amendments.

Identify who is responsible for paying and whether another party has agreed to contribute. Keep the relevant agreements together so the brokerage can explain the total compensation without counting the same promised payment from two sources. The responsible broker or adviser should review any uncertainty about eligibility, limits, or disclosure under applicable rules.

ALTA publishes settlement statement forms for documenting transaction amounts. Obtain the final statement and relevant disbursement detail for the actual closing, then compare them with the compensation agreements. A draft prepared before the last concession or fee change may no longer describe what was paid.

Check whether the closing agent paid the brokerage gross, paid an agent or referral recipient directly under authorized instructions, or netted particular charges. A direct payment can satisfy an obligation without passing through the brokerage's bank. Keep the gross amount and the direct settlement visible for the accountant's review of appropriate presentation.

An agent agreement might apply a split before or after an approved referral fee, include a cap, or charge a specific transaction amount. Write the calculation in the order the agreement requires. Applying a percentage to a different base can produce a plausible payment that is nevertheless wrong.

Track an agent's accumulated cap or fee tier against the effective compensation year. A reset after an anniversary should not change the split on an earlier closing.

In a hypothetical transaction, gross brokerage compensation is $12,000. Assume the approved arrangement assigns $7,500 to the agent, $1,500 to a referral recipient, and $3,000 to the brokerage before other costs. Those three amounts total $12,000. If the settlement agent pays the first two directly and remits $3,000, the bank alone does not show the complete arrangement.

These amounts are illustrative and do not establish a market commission, permitted referral arrangement, or tax classification. Have the responsible broker confirm the contractual and regulatory basis, and accounting confirm the gross or net reporting treatment. The reconciliation preserves the facts needed for those decisions.

A transaction can close at the end of a month while the commission settles later. Retain the closing evidence, amount due, payer, and subsequent receipt so accounting can apply the relevant revenue and accrual policy. Do not move the closing date simply to match the bank's processing date.

If compensation changes after closing, preserve the reason, agreement, and linked credit or additional payment. A returned commission, disputed referral fee, or corrected agent split should not appear as a new unrelated deal. Update the transaction's final result while retaining the original settlement history.

At month-end, list completed closings with unpaid compensation, agent or referral obligations awaiting payment, and settlement discrepancies. Assign each item to someone who can obtain the missing evidence. Keep sensitive bank and client details in the controlled transaction file rather than circulating them in a broad pipeline report.

Look for recurring errors in split bases, rate effective dates, caps, and direct disbursements. Correct the underlying setup before the next closing instead of repeatedly adjusting the ledger afterward. A final deal record should explain the agreed amount, the work or closing event supporting it, every recipient's share, and what remains to be settled.