What a percentage of the sale comes to
Commission is simple arithmetic that people get wrong for one reason: they apply the rate to the wrong base. This calculator does the multiplication; the sections below cover which number to multiply.
The formula
Worked example: 3% on a $250,000 sale
- Commission: $7,500
In residential property that 3% is usually one side of a total closer to 6%, split between the listing agent and the buyer's agent, and then split again with each brokerage. The agent handling the sale might take home $1,875 of the $7,500.
Tiered and split structures
Sales roles rarely pay a flat rate. Two common structures on $250,000 of sales:
| Structure | Calculation | Commission |
|---|---|---|
| Flat 3% | 250,000 × 3% | $7,500 |
| 2% to $150k, 4% above | 3,000 + 4,000 | $7,000 |
| 3% above a $100k threshold | 150,000 × 3% | $4,500 |
The third case is the one that catches people out. A threshold means the rate applies only to sales beyond it, not to everything once you pass it.
Gross sale or net revenue
Whether the base includes tax, shipping, discounts and returns changes the figure materially. On $250,000 of gross sales with 8% returned, commission on net is $6,900 rather than $7,500.
Most agreements pay on net revenue after returns and after any discount the salesperson authorised, precisely so that discounting to close a deal costs the person doing it something. Read which base applies before estimating earnings.
When it is paid
Commission usually vests on payment received rather than on contract signed. On 45-day terms that is a six-week gap between making the sale and being paid for it, and if the customer never pays, most agreements claw the commission back.
What this calculator leaves out
Draw against commission, accelerators above quota, brokerage splits, and income tax — commission is frequently withheld at a higher supplemental rate than salary, though the annual liability is the same.
Commission as a business cost
From the company's side, 3% of revenue is a variable cost that scales perfectly with sales — the appeal of the model. It also sits directly against gross margin.
On a product with a 40% gross margin, a 3% commission consumes 7.5% of the margin, not 3% of it. At a 12% margin the same commission takes a quarter. Whether a commission rate is affordable is a question about margin, never about revenue.
Estimating annual earnings from a rate
A 3% rate means nothing without an expected sales volume. Ask what the median rather than the top performer closed last year, because commission-only roles are usually presented with the top figure.
On $250,000 of quarterly sales, 3% is $30,000 a year — which is a full income in some markets and a supplement in others. If a base salary is offered alongside, check whether commission is paid on top of it or recovered against it first.
Related calculators
- Sales commission calculator — tiered and split structures in detail
- Real estate commission calculator — the property convention
- Margin calculator — what remains after the commission is paid