Key Highlights
- Inman’s 2020 Agent Appreciation survey dives deep into agent compensation models
- Part II of this multi-part series focuses on themes of non-compensation income modelsand pressure on compensation
Inman just released its second annual.2020Agent Appreciation survey. Because agent and brokerage compensation is such a hot topic, we are focusing on summarizing the rich diversity of compensation models in the real estate industry as highlighted within this survey.
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In Part I of this multi-part series, we discussed Inman’s themes in the evolution of commission models today.
In Part II of this series, we’re concentrating on non-compensation income models and pressure on compensation.
Non-compensation Income Model
One of the most widely used non-commission income models is stock. eXpRealty offers stock to agents as they hit certain benchmarks in their transaction volume. Famously, agents who sign up with eXpRealty get $200 in stock and with every transaction, agents can allocate up to 5% of their commission to buy stock at a 10% discount that can be sold immediately. EXp agents who hit their commission cap of $16,000 (explained in Part I of this series) get additional stock awards. They also get stock awards for bringing along other agents into the company such as team members, entire brokerages, and/or colleagues located both state-side and internationally. EXp agents can also choose to take some of their commission earnings in stock.
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By the way, shares of eXp were trading at approximately $11/share. In January 2020 and then climbed to more than $93/share in January 2021.
Compass has also made its stock program front and center to its agent recruitment program as well as to its equity programs via restricted stock units (RSUs) or agent equity option program.
Redfin is best known for its salary model to compensate agents.
Keller Williams is best known for its profit sharing model. Both the salary and profit sharing non-compensation income models require scale and exceptionally strong lead generation programs and techniques.
Pressures on compensation
There are multiple sources of downward pressure on agent commissions right now.
One of the sources, according to Carl Medford, leader of the Medford Team in the San Francisco Bay Area, is the combination of record-low supply and record-high demand. Why pay agents commissions in markets where houses seemingly fly off the shelves all by themselves? Of course, if an agent doesn’t know how to negotiate in a competitive market, that agent’s client will lose out on the home sale so doesn’t it make sense to pay a skilled agent a commission in the long run?
Nick Bailey with RE/MAXtold Inman, “There is always someone out there that has a license who will be willing to do something for nothing.” Bailey added, “…in a seller’s market there is pressure on commission rates to go down. In a buyer’s market there is upward pressure.”
Adam Hergenrother, an owner of several Keller Williams brokerages located in the northeast, believes pressure on agent commission is coming from tech-enabled firms such as Redfin as well as firms such as Compass and Opendoor that seemingly have huge war chests backing them. (Softbank has made mammoth investments in both of these companies plus both have either already or will soon seek more financing via public offerings.)
Mike DelPrete, a highly regarded real estate consultant, indicated to Inmanthat iBuyers are putting significant downward pressure on agent commissions. DelPrete and others don’t think such downward pressure is going away any time soon.
Thanks to Inman.
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