Key Highlights
- According to latest Inman research, there is great variability in agent commission models
- New commission models evolving
- Intense downward pressure on commissions
- Inman research defines main themes of agent commissions
Commissions are always hot conversational topics in the real estate industry. Since, according to the latest research by Inman for its second annual Agent Appreciationsurvey,both agents (87%) and brokerages (81%) make the bulk of their respective incomes from commissions, it makes sense that agents and brokers are well aware of the highly diverse commission models under which they are working and earning.
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To help understand the topic of agent compensation currently, Inman developed “main themes” that define agent compensation today. These themes include:
- The evolution of the commission model
- Compensation models today
- Non-compensation income models
- Pressures on compensation
- Defending your commission
- Ongoing commission lawsuits
- Compensation isn’t only about money
In Part I of this multi-part series we calling “Pay Attention to How You Get Paid – Part I” we’ll discuss the evolution of the commission model and compensation models today.
The Evolution of the Commission Model
In the 1970’s, the standard practice for commission splits was 50/50 between agents and brokerages. Then, RE/MAX and later Keller Williams came along and began the trend of greater percentages of commission splits going to agents. Today, commission splits are agent-centric. The larger the sale volume an agent generates, the more that agent earns via commission.
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Inman’s Agent Appreciationsurvey indicated the percentage of agents earning gross commission income in 2020:
– Less than $25,000 9%
– Between $25K and $50K 8%
– Between $50K and $75K 7%
– Between $75K and $100K 11%
– Between $100K and $200K 29%
– More than $200K 35%
This survey also indicated the percentage of agents generating specific sale volume levels:
– Less than $100K 4%
– Between $100K and $300K 3%
– Between $300K and $500K 3%
– Between $500K and $1M 6%
– Between $1M and $5M 23%
– Between $5M and $20M 46%
– More than $20M 14%
Commission Models Today
The bottom line here is that there are almost as many definitions of commission splits among agents and brokerages as there are real estate companies. And, to make things even more complicated, some real estate franchisors, such as RE/MAX and its individual agent operators, are free to customize their commission programs within their franchises.
At eXpRealty,the commission split is consistent among all of its individual agents wherever they do business. Every agent begins with a commission split of 80% going to the agent and 20% going to the company. However, eXp caps what the company can earn at $16,000/year. That means that once an agent hits the limit of $16,000 going to the company, the agent then collects 100% of the commission.
Spyglass Realty in Austin TX uses a “graduated split model.” Agents doing up to $3M in sale volume earn a 75/25 split. When an agent’s volume reaches between $3M and $5M, the agent’s split increases to 80%. When an agent’s volume reaches $5M and above, the agent earns a 90/10-commission split.
McQuaid & Company in Naples FL uses a three-tier commission split but did not share the specifics of those different tiers. Obviously, the agent’s split increases the more that agent’s sales volume rises.
It’s important to remember that many agents who are members of teams “share” their splits with their team leader. For example, an agent on a team with a company that has an 80/20-commission program is also sharing half of that 80% commission with her/his team leader.
Inman found that overall, nearly two-thirds of all agent respondents to this 2020 Agent Appreciationsurvey indicated that they keep more than 70% of their commissions. 20% of the agent respondents earn 70/30 splits and just 3% earn 50/50 splits.
Thanks to Inman.
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