Part II of this multi-part series on “How Agents are Getting Paid in 2022” focuses on non-commission income models.
Stock and Profit-Sharing Models
eXp Realty infamously offers stock in eXp World Holdings to agents when they sign up with the company and as they hit various transaction milestones. Initially, agents get $200 in company stock when they sign the bottom line with eXp. As agents hit their commission caps by generating more and more transactions, eXp agents earn other stock awards as well as greater commission splits. Agents can also choose to earn their commission in the form of stock.
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Obviously, the longer an agent has been with eXp, the greater the agent’s income via stock amounts, valuation and profit sharing.
Compass made its stock program a major focus in recruiting its agents when the company went public in 2021. Keller Williams, like eXp, touts its profit-sharing offerings as a way to let agents participate in the firm’s overall success.
Redfin is the best-known brokerage that uses the salary model. Other firms, such as Zillow, offer salaries to its real estate advisors and/or assistants but offer “regular” commission splits to professionally licensed real estate agents.
Increasing Downward Pressure on Agent Compensation
Real estate professionals are in broad agreement about there being “significant” downward pressure on agent commissions these days.
Because the housing market is so highly competitive with far more agents than available for-sale houses, Carl Medford, leader of the Medford Team in California’s Bay Area, told Inman, “because the unit count (of sales) is so low for teams in this region, they’ll (competing teams) do almost anything to get a transaction.”
“Almost anything” means that the typical 5% commission paid by the seller, split equally among agents on each side of the deal, is increasingly being offered to the seller at 4%. In such an offer, the buyer’s agent typically collects only 1.5% or 2% of the commission and the seller’s agent collects only 2% or 1.5% for themselves.
Bailey with RE/MAX said that agent competition is creating “…in some ways a race to the bottom…(because)…there’s always someone out there that has a license who will be willing to do something for nothing.”
Adam Hergenrother, owner of several Keller Williams franchise brokerages and other companies in the Northeast, believes downward pressure on agent compensation is also coming from some tech-enabled firms that essentially “guide” consumers with simple solutions. Essentially, if the consumer can search for and thoroughly research a house online, do due diligence online, etc., why pay an agent a traditionally sized commission?
Additionally, iBuyer companies and companies with mega funds from investors at home and abroad are touting fees rather than commissions as ways to compensate both agents and brokerages. What some consumers don’t realize, however, is that too often fee structures are more expensive for the clients than commission structures.
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Thanks to Inman.