Cap vs. split: how do brokerage commission caps work?

What is a commission split?

It's how each commission divides between the agent and the brokerage, written agent first. At 80/20, on a $10,000 commission the agent keeps $8,000 and the brokerage keeps $2,000.

On a straight split, that's the whole plan: the same share comes off every deal, all year, every year. The more the agent sells, the more the brokerage earns from them, with no ceiling. Some brokerages move agents to a better split as their production grows, but the share never stops.

What is a commission cap?

It's a ceiling on that share. Frank, Capped's CEO and a former broker owner, puts it simply in what capped means: once an agent has paid the brokerage its cap for the year, every commission after that is theirs, minus any small transaction or franchise fees, until the year starts over.

His example: an 80/20 split with a $16,000 cap. At $10,000 a deal, the brokerage keeps $2,000 each time, so after eight deals the agent has paid $16,000 and is capped. On deal nine, the whole $10,000 is theirs. Try your own plan:

Caps commonly fall somewhere between $12,000 and $25,000, Frank writes, depending on the company. What matters more than the number is where it sits against your agents' production, which is the next picture.

What does a cap change for the brokerage?

Nothing, for most of the year's production. A cap only matters once an agent reaches it, and the point they reach it is the cap divided by your share: $16,000 ÷ 20% is $80,000 of commission. Below that, a capped plan and a straight split earn you exactly the same.

Above it, the lines split. On a straight split, what you earn from an agent keeps growing with them. With a cap, it stops at the cap, and everything above it stays with the agent. Frank's example from the other end: an agent with $300,000 in commission on a 70/30 split hands over $90,000 a year; on a capped plan, the same agent might pay $16,000 to $25,000.

That changes how a brokerage grows. In Frank's words, it moves the math from making more per agent to attracting and keeping more great agents:

• What each agent brings in is predictable, and has a ceiling, so growth comes from adding agents and keeping them.
• Productive agents notice. They're the ones who reach a cap, so they're the ones who compare caps, and they'll do the math on yours in minutes.
• The value has to be there before the cap. Once an agent has capped, what keeps them is what you give them, not what you take.

When does the cap reset?

Once a year, on one of two calendars. On an anniversary year, each agent's cap starts over on the date they joined. On a calendar year, everyone's starts over in January.

A calendar year is simpler to run, since everyone resets together. But an agent who joins late in the year gets a short first year to reach the cap in, unless you prorate it, so say which you do before they sign.

What else is in a commission plan?

The split and the cap are the headline. These are the words around them that agents will ask about:

Whatever is in yours, write it down in one place and show it the same way to every agent. A fee an agent finds after they've joined costs more trust than it earns.

How do you choose a cap?

Start from your own agents rather than a competitor's number:

1. Find where your agents would cap. Divide the cap by your share to get the commission an agent needs to reach it, then count which of your agents get there. Those are the agents the cap is for.
2. Know what an agent costs you. The office, staff, technology and training you give every agent for a year. The cap is the most a productive agent will ever pay toward it.
3. Look at what agents are comparing. The caps at the brokerages you recruit against are the numbers your recruits will hold yours up to.
4. Decide what happens after the cap. Whether transaction or franchise fees keep going, and say so up front.

Then try your plan on a few real agents' years in the calculator above, a newer agent and your best one, and see whether both results feel fair to you and to them.

How do you talk about your cap when you recruit?

With the agent's own numbers. Ask what they closed last year, run it through their current plan and yours, and show them the difference. A cap is easy to understand in a sentence and easier to believe on their own year.

Then move past it. As Frank writes, the cap is only half the question: the other half is what the agent gets before they cap, the support, systems, training and brand behind them. There's more on running that conversation in how independent brokerages recruit agents.

Where does Capped fit?

Agents want to know how close they are to capping, and if the answer lives in a spreadsheet at the office, someone has to look it up every time they ask. Capped's virtual office has a Production add-on that tracks each agent's progress to cap, inside the same office where they join, find their tools and see what's on.

And we price the office the way a cap works: one flat monthly fee for the brokerage, however many agents you add.