Sales commissions remain at the core of real estate agents’ livelihoods but other compensation models are coming into play. This multi-part series looks at pay models and how to maximize your financial options within the real estate industry.
Part I of “How Agents Are Getting Paid in 2022” focuses on the commission model itself.
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Evolution of Commission Model in Real Estate Industry
Back in the day, brokers and agents split commissions pretty evenly at around 50/50 until RE/MAX came onto the real estate scene in the 1970’s. RE/MAX’s founders Dave and Gail Liniger “…put ownership in the hands of the agent,” said Russ Cofano, former president of eXp Realty and current CEO with Collabra Technology.
Nick Bailey, RE/MAX’s president and CEO, said that the RE/MAX concept “…really did change the landscape for real estate agents.”
The philosophical shift in thinking towards agents being seen as the controlling factor in the business was accelerated when Keller Williams arrived in the 1980’s.
Today’s agent-centric commission split model reinforces the concept that agents, not brokers/brokerages, control the real estate business.
Current Commission Models
There are as many commission split models as there are ice cream flavors.
RE/MAX, according to Bailey, recommends that its franchisees offer 95% of the commission to the agent with 5% going to the brokerage. However, because RE/MAX is a franchisor, each individually operating franchisee can customize its own respective commission program.
Agents with eXp Realty begin with a split that offers them 80% of their commission with the remaining 20% going to the company, according to CEO Jason Gesing. Once that eXp agent reaches a cap of $16,000 going to the company per year, the agent then collects the total 100% of the commission.
Ryan Rodenbeck, owner of Spyglass Realty in Austin TX, uses a tiered or graduated split model. Translated, agents doing up to $3M in volume have a 75/25 split; agents doing between $3M-$4M have an 80/20 split; and agents doing $5M+ have a 90/10 commission split.
Tiffany McQuaid, president of McQuaid & Company in and around Naples FL, also uses a tiered or graduated split model but did not offer any specifics. Basically, agents earn more as agents do more deals.
Money Not Everything
According to survey data from Inman, it’s common for agents to keep 70% or more of their commission split. Likewise, agents working with teams or team-like firms often “share a sizable portion of their split with a team leader…” however Inman did not offer any definitions of what a “sizable portion” of a commission split actually is.
Inman indicated that most agents appear to be satisfied with their commission splits likely because agents are satisfied with the tools and support offered to them by their brokerage. McQuaid, for example, said, “I believe compensation goes beyond dollar vale, and I believe you really have to factor that in.”
Some rewards are intangible such company culture, camaraderie, tech tools and services, branding, etc.
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Thanks to Inman.