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What is Split Commission?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 September 2016
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A split commission is a form of compensation that is divided between two or more parties. This type of commission is usually awarded when multiple individuals are involved in the process of accomplishing a sale. While more commonly associated with the process of buying and selling investments, the concept of split commissions is also found in the real estate industry, as well as many retail and wholesale sales situations.

With investing, a split commission may involve the combined efforts of a broker and an agent to manage the sale of securities. Depending on the structure of the brokerage house, the agent may interact with the investor to identify investment opportunities that carry an adequate earning potential while also involving what the investor considers an acceptable degree of risk. The broker is on hand to answer questions and aid in the decision making process regarding whether or not to acquire the investment. Once the investor decides to execute an order, the agent may frame the order, then turn it over to the broker who conducts the actual buying and selling. For their combined efforts in making the sale, the two parties split the amount of commission generated by the combined purchase and sale.

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In the world of real estate, a split commission may occur when a property listed with one realtor is sold by a different real estate agent. Many real estate agents combine resources to move a property that has been on the market for awhile. Thus, if an agent has a client who is interested in a property currently placed with another agency, the agent will take steps to broker a deal with that agency to get the best deal possible for the client. If all parties agree, the sale is executed, and both the agent brokering the deal and the real estate agent who owns the listing receive equal portions of the commission resulting from the sale.

It is not unusual for a split commission to occur in retail and wholesale sales situations. For example, two salespeople working for the same company may combine their efforts to secure a new customer that will provide a steady supply of revenue for the business over several years. Since the two salespeople jointly researched, qualified, and pursued the account, and possibly even closed the deal together, the resulting commission is split between them. While some companies do not make allowances for a split commission, those that do normally have provisions that require that the resulting revenue be at a certain volume before a commission can be split among two or more salespeople.

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