How To Create a Real Estate Commission Disbursement Authorization (CDA)

Content for Closers, the Paperless Pipeline blog, has extensively covered real estate commissions—and for a good reason. Commissions are both the reason for and the motivation behind real estate agents and brokers’ productivity. The commission earned on each closed transaction is the driving force behind successful long-term growth. 

However, as vital as the commission check is, the money doesn’t simply appear in bank accounts without preparation and work. From the outset, the net amount paid to agents or received by your brokerage is determined by the commission plan negotiated by each agent. Whether you offer a flat fee or a percentage split, a commission cap or tiered thresholds, or lead-source incentives—each has an impact on the commissions received. The specific commission plan details dictate how each final commission is calculated, what net payables will appear on your commission disbursement authorizations, and, ultimately, what lands in your bank account. 

Ideally, real estate professionals want the time between closing and payment to be quick. For many, the process is slow, cumbersome, and at times, requires traveling to pick up a physical check. For others, the process is streamlined with a well defined and simple way to manage commissions earned by agents and brokers.

An online reporting system built into your real estate transaction management software can help admins calculate commissions quickly and seamlessly account for various commission plans, franchise fees, agent fees, client fees, earnest money, and more. With a simple system like Paperless Pipeline, the process is automated and easy for even the most complicated commission calculations. 

With a solid understanding of your commission plans and an air-tight way to quickly calculate and accurately track commission amounts, you can create commission disbursement authorizations for each closing with little effort. 

What is a Commission Disbursement Authorization? 

The CDA, or Commission Disbursement Authorization, is a document that can be sent to the escrow company, title company, attorney, or whoever is handling the closing. It gives instructions on how the commission should be dispersed and is essentially a payment request to the closing company. 

Why should I create Commission Disbursement Authorizations? 

Managing commission plans usually requires extensive paperwork and often leads to headaches for busy real estate professionals—agents, admins, and brokers alike. Creating a commission disbursement authorization before the closing and sending it to your closing company ahead of time is a great way to ensure commission payments are fast, and your agents are continually delighted. A CDA also offers the opportunity to have agents receive payment directly, rather than the full commission payment going to your brokerage where it then needs to be deposited and later disbursed to your agents. 

How to Create a Commission Disbursement Authorization:

Follow these 5 steps to create a Commission Disbursement Authorization (CDA):

Step 1: Write out the sale Information the commission overview

A clear and precise Commission Disbursement Authorization should begin with the high-level information that’s most important to identify immediately. Your closing company will likely have much of this data available, so clearly stating which deal the commission applies to is essential.

Add fields that will help the closing company identify which deal the CDA is for, and provide the transactional information that’s vital: buyer and seller information and purchase agreement information.  

Step 2: Include the Closing Company Contact Information

The CDA should be addressed appropriately to the specific closing company contact. This will document which escrow or title officer is responsible for correctly following the remainder of the authorization form, and who should be contacted should any errors occur.

Step 3: Add Each Net Payable Line-Item

Once the CDA includes a sale overview and the closing company contact information, the next step is to calculate how much each party is to be paid from the commission. This includes agent earned commissions, brokerage commissions, deductions paid to external parties, and referral commissions. 

Once that’s calculated, it’s essential to determine each payee line-item. Some companies may prefer each payee receive a check directly, others may have requirements in place that restrict their ability to send funds directly to external parties. This isn’t always the same as each separate value calculated as net payables. For example, If your brokerage collects franchise fees and then pays that out separately, both the franchise fee and the brokerage commission should be added together and written out as one payee. 

Step 4: Add Payment Instructions

Specific payment instructions will vary, but your Commission Disbursement Authorization should very clearly include how the closing company should make payments, notify payees, or submit confirmation. 

For example, your agents may need checks cut to their legal business entity, rather than their name. In this case, make sure that the entity name is available along with any other tax-related information. Another example might be direct deposit instructions, delivery instructions, or pickup instructions. All of this should be included on the CDA in the most appropriate spot.  

Step 5: Sign and send the Commission Disbursement Authorization (CDA)

The final step is having the document signed by the person authorized to do so. After that, the Commission Disbursement Authorization can be sent off to the escrow officer, title officer, or attorney. 

With Paperless Pipeline, your CDA can be created instantly as you seamlessly calculate real estate commissions for each deal. It can also account for earnest money withholding to make the process even more seamless and straightforward. Once created in the system, ship it off to the contact in just a couple of clicks and an automated email.  

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