How Does Commission Flow in a Real Estate Transaction?

At a high level, commission flows like this:

Seller → Closing → Brokerage → Agent

The seller pays commission as part of the transaction.

The closing agent collects those funds and distributes them according to the brokerage’s instructions.

The brokerage then pays the agent.

1. The Client Agrees to Pay the Brokerage

The transaction starts with an agreement.

The seller signs a listing agreement with the brokerage.

That agreement says the seller will pay the broker a commission for services.

The agent is not part of that contract.

The brokerage is.

2. The Commission Is Collected at Closing

At closing, the commission is included in the seller’s closing costs.

The funds are deposited into the closing agent’s account.

The closing agent does not decide who gets paid.

They follow instructions

Once the commission is at the closing table, the brokerage controls what happens next.

There are two ways this is handled.

Option 1: Standard Flow (Single-Check)

The full commission is sent to the brokerage.

Then:

• The brokerage deposits the funds
• The brokerage calculates splits
• The brokerage pays the agent

This is the traditional model.

Option 2: CDA Flow (Split Disbursement)

The brokerage submits a Commission Disbursement Authorization (CDA).

The CDA tells the closing agent:

• How to split the commission
• Who should receive each portion

The closing agent then distributes funds directly at closing based on those instructions.

The broker is still controlling everything.

Even when an agent receives funds at closing, they are being paid:

• In the name of the brokerage
• With the brokerage’s authorization

The agent is never being paid independently.

That distinction is critical.

In most transactions, there are two sides:

• Listing brokerage
• Buyer’s brokerage

The total commission is divided between the two brokerages.

Each brokerage then handles its own agent compensation.

The same rule applies on both sides.

Agents are paid by their broker.

Commission does not flow like this:

Client → Agent directly

That is not how real estate works.

A sales associate cannot collect money directly from a client in a real estate transaction.

Everything must flow through the brokerage.

This structure ensures:

• Legal compliance
• Broker supervision
• Proper accounting of funds
• Clear responsibility for the transaction

The broker is responsible for the deal, so the broker controls the money.

Many agents believe:

“The title company pays me.”

That is not accurate.

The title company is only executing instructions.

The brokerage is directing the payment.

Putting it all together:

• The client agrees to pay the brokerage
• The commission is collected at closing
• The brokerage controls the funds
• The brokerage pays the agent or authorizes payment

That is how commission flows in every real estate transaction.

Commission flows from the client to the brokerage, then from the brokerage to the agent.

The agent is never paid directly by the client.

The brokerage always controls the money.