A CDA form in real estate, short for Commission Disbursement Authorization, is a document signed by a real estate broker that instructs the closing agent exactly how to split and pay out commissions at settlement. Instead of the entire commission going to the brokerage and waiting on internal accounting, the title company or escrow officer distributes funds directly to the agents, the brokerage, and any third parties owed a share. The broker’s signature is what makes it work, and errors on the form will freeze everyone’s payment until a corrected version arrives.
Why the Form Exists
In virtually every state, real estate commissions are legally earned by the brokerage, not the individual agent. A salesperson or associate broker has no independent right to collect commission from a closing. Title companies know this, so they will not cut a check to an individual agent unless the sponsoring broker authorizes it in writing. The CDA is that authorization.
When a broker signs a CDA and sends it to the closing agent, the broker is stating precisely how the commission should be divided and to whom each portion should go. The title company follows those instructions on closing day. Without the form, the closing agent has no choice but to send the full commission to the brokerage and let the firm handle internal distribution, which can take days or weeks depending on the brokerage’s accounting cycle.
What Belongs on the Form
Formats vary by brokerage and transaction management platform, but the core data points are consistent:
- Property address, escrow or file number, and scheduled closing date, so the CDA is tied to the correct transaction file at the title company.
- Buyer and seller names, along with the names and license numbers of the agents on each side.
- Contract sale price and the total gross commission amount, which sets the pool available for distribution.
- The commission split broken down by payee, showing the precise dollar amounts going to the brokerage, the agent, and any third parties such as referral partners or transaction coordinators. Most CDAs use dollar figures rather than percentages to eliminate ambiguity.
- Tax identification numbers: the brokerage’s federal EIN and, when payments go directly to agents, the agent’s Social Security number or individual EIN. These drive the 1099-NEC forms issued after closing.
- Payment instructions for each payee: paper check, wire transfer, or ACH deposit, and the exact name (individual or legal entity) the payment should be issued to.
- Name, phone number, and email of the title company representative handling the file.
Every dollar on the CDA must match the commission figures on the Closing Disclosure or ALTA settlement statement. The title company cross-references the two, and any discrepancy will freeze the commission funds until a corrected CDA arrives. Recheck the math the day before closing, especially if the purchase price shifted late in the deal.
How and When to Submit It
The agent typically prepares the CDA in the brokerage’s transaction management software, then routes it to the managing broker or a designated compliance officer. The broker verifies that the split matches the agent’s independent contractor agreement, confirms the brokerage’s share, and signs. That signature is the formal authorization for the title company to pay someone other than the brokerage.
Electronic signatures are standard. Under federal law, a signature or contract cannot be denied legal effect solely because it is in electronic form, and that rule applies to real estate transactions.1Office of the Law Revision Counsel. 15 USC 7001 – General Rule of Validity Most brokerages use platforms such as Lone Wolf Transactions, Dotloop, or SkySlope to prepare and sign CDAs before transmitting them to the title company through an encrypted portal.
Timing matters. Deliver the signed CDA at least three to five business days before the scheduled closing. That gives the escrow officer time to incorporate the disbursement instructions into the final settlement calculations and to flag any issues. If the CDA arrives late or not at all, the title company will typically send the entire commission to the brokerage, and the agent waits on internal disbursement.
What the CDA Means for Your Taxes
Federal tax law treats qualified real estate agents as statutory non-employees when three conditions are met: the agent holds a real estate license, substantially all of the agent’s compensation is tied to sales output rather than hours worked, and a written contract specifies the agent will not be treated as an employee for federal tax purposes.2Office of the Law Revision Counsel. 26 USC 3508 – Treatment of Real Estate Agents and Direct Sellers This is why agents receive a 1099-NEC instead of a W-2 and why the CDA’s direct-payment structure works at all.
When a title company pays an agent directly under a CDA, the entity treated as making the payment for 1099 purposes is not always the entity that physically cuts the check. The listing broker, for instance, may still be responsible for reporting cooperative commissions paid to the buyer’s broker, even when the escrow agent sent the check, because the funds came from the listing broker’s commission.3National Association of REALTORS. IRS Requires Reporting of Cooperative Commissions The IRS requires a 1099-NEC for any nonemployee compensation of $600 or more during the year.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC An incorrect tax ID on the CDA can trigger a mismatched 1099 and an IRS notice months later, so verify every number before the form goes out.
RESPA Limits on Who Can Be Paid
Any closing involving a federally related mortgage falls under the Real Estate Settlement Procedures Act. RESPA prohibits giving or accepting any fee, kickback, or thing of value in exchange for referring settlement service business, and it bars splitting a settlement service charge with someone who did not actually perform services to earn that share.5Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees
This is where the CDA can create legal exposure. If the form directs the title company to pay a portion of the commission to a third party who did not perform actual services, that payment may be treated as an unearned fee. The CFPB’s implementing regulation states that if a payment bears no reasonable relationship to the market value of the services provided, the excess may be treated as evidence of a violation, and the value of a referral itself cannot be counted when determining reasonableness.6Consumer Financial Protection Bureau. Prohibition Against Kickbacks and Unearned Fees
RESPA does allow cooperative brokerage arrangements, referral fee agreements between licensed brokers, and compensation for services actually performed. A line item on a CDA for a referral fee to another licensed broker, or a transaction coordinator fee for work actually done, is generally permissible. The test for each payee listed on the CDA is whether they did something real to earn the money.
How the 2024 NAR Settlement Changed the Form
The 2024 NAR settlement reshaped how buyer agent compensation works, and those changes flow directly into CDA preparation. Under the new MLS rules, listing brokers can no longer include offers of buyer agent compensation in the MLS, and the MLS is prohibited from creating or supporting any platform that facilitates such offers.7National Association of REALTORS. Summary of 2024 MLS Changes
Before the settlement, the listing side’s CDA was straightforward: the total commission appeared on the listing agreement, the MLS showed the cooperative split, and the closing agent divided the funds accordingly. Now, buyer agent compensation can come from several sources. The seller might agree to pay it as part of the purchase contract. The buyer might pay their agent directly. Or some combination of concessions and direct payment might fill the gap. Each scenario changes what appears on the CDA and who signs off on which portion.
The settlement also requires that MLS participants working with a buyer enter into a written agreement before touring a home. That agreement must specify the amount or rate of compensation in an objectively ascertainable way, and it must prohibit the agent from receiving compensation exceeding the agreed amount from any source.7National Association of REALTORS. Summary of 2024 MLS Changes The buyer agent’s CDA figure has to align with that written agreement. If the seller is offering a concession that covers part of the buyer agent’s fee, the CDA needs to reflect the correct source and amount rather than lumping everything together as a traditional cooperative split.
Mistakes That Delay the Check
The most frequent CDA error is a math mismatch between the CDA and the Closing Disclosure. The title company holds the funds until someone fixes it. This usually happens when the purchase price changed after the CDA was prepared, such as after a repair credit or appraisal-driven reduction, and nobody updated the CDA. Run the math one final time the day before closing.
Wrong tax identification numbers cause a slower kind of problem. The title company may still close and disburse, but a mismatched EIN or SSN means the 1099-NEC goes out with incorrect information. That creates a reporting discrepancy that can trigger an IRS inquiry months after closing, when the deal is long gone from your active files.
Listing deductions for personal expenses or payments to unlicensed individuals is a more serious problem. State regulators have flagged instances where brokers used CDAs to instruct escrow agents to pay the broker’s personal bills, office rent, or other expenses unrelated to the transaction. That practice violates escrow disbursement rules in most states and may run afoul of RESPA when a federally related mortgage is involved. Every line item on a CDA should represent a legitimate commission split or a payment for services actually rendered on that specific transaction.
Watch for Wire Fraud
When a CDA specifies wire transfer as the payment method, it carries the same wire fraud risk that plagues the rest of closing. Hackers who compromise an email account can intercept CDA instructions and substitute their own routing and account numbers. The funds leave the title company’s account and land in a fraudulent one before anyone notices. If your CDA includes wire instructions, confirm the routing and account numbers by phone using a number you already have on file, not one from the same email that delivered the wire instructions.