Every real estate agent wants to earn more money in their transactions. That’s why many ask: “Do 100% real estate commission models work?”
Let’s explore 100% real estate commission models in comparison to traditional splits.
- We explain the most popular commission splits: 50/50. 70/30, and 100%.
- Also, we explain the Keller Williams 64/30/6 splits.
- We compare all 4 commission splits on a $24,000 commission.
- How 100% brokerages profit.
- What hidden fees on 100% brokerages to look out for.
- The best time for new agents to join a 100% brokerage.
- The perfect “Win-Win” structure for the agent and the broker.
What Are The Traditional Commission Splits?
However, Fits Small Business points out that most brokerages start with a traditional 50/50 split every year. Then, gradually increases the split in the agent’s favor depending on set goals achieved during the year. Often, this reaches 80/20. Yet, the commission split rolls back to 50/50 at the new year. Known as the “cap system” where the cap resets itself every year.
Here’s a chart published by The Close illustrating how the 64/30/6 commission split works.
Comparing 100% Real Estate Commission Models with Traditional Splits
As you read above, the five traditional commission splits are:
- 80/20; and
- 64/30/6 Keller Williams split.
Comparing 50/50 with 70/30 and 100% Commission Splits
The chart below demonstrates how these three splits look next to each other:
Now, let’s use an example to compare these three splits (50/50, 70/30, and 100%).
Let’s say you list and sell a house for $400,000 and earn a commission of $24,000 (6%).
The $24,000 known as Gross Commission Income (GCI) first gets paid to the broker by law. Then, the GCI gets divided between the broker and the agent who earns a Net Commission Income (NCI) as the take-home pay.
Here are how the commission splits occur:
Note: You gain $12,000 or $7,200 with the 100% commission split.
Let’s compare the Keller Williams commission split with 100% on a $24,000 commission
Note: You gain $8,640 with the 100% commission split over Keller Williams.
How 100% Real Estate Commission Models Work
Not every 100% commission brokerages operate the same way. The broker needs to profit from this commission split.
Here are ways that brokers earn fees from their 100% commission real estate agents:
- Desk fee by letting the agent “rent” a desk, chair, shelves, and a file cabinet in an open-space floor with other agents;
- Office fee by renting a private office with a door and lock and more space for furniture, chairs, and equipment;
- Conference room rentals for large meetings;
- Administrative fees by charging fees for essential support staff and services;
- Transaction fee for each transaction;
- Errors & Omissions (E&O) insurance fee for every transaction protecting the broker and the agent from lawsuits caused by errors, negligence, and personal injuries related to work;
- Transaction Coordinator fee to handle and organize all the important transaction documents to make sure all parties sign them for the closing;
- Training fees by offering courses teaching important agency functions and marketing skills; and
- Supplies fees range from copying, coffee/tea, faxing, and other necessary supplies.
Since the COVID-19 pandemic, most agents now work out of their homes. So, many of the above office fees are no longer necessary. Virtual agents with a home office now number more than in-office agents.
Beware of Hidden Fees
Some brokerages never mention their small hidden fees and emphasize what you can do with 100% of the commissions. Since every broker and agent relationship begins with a written agreement you must read the entire agreement carefully. That’s where you will find the hidden fees somewhere in the agreement.
For instance, a brokerage may disguise hidden fees in their E&O insurance riders where the fee increases based on the size of the transaction. Sell a $300,000 house and pay one E&O fee. Yet, selling a $400,000 house with a higher E&O fee.
Additional hidden fees use names like:
- Brand fee;
- Compliance fee;
- Setup fee;
- Technology fee; and
- File review fee.
None of these fees are necessary.
Small fees add up quickly during a transaction. You must keep track of every one of them to know what your net commission income is after the closing.
When is the Best Time to Join a 100% Commission Brokerage?
Once you pass your state real estate license exam you need to learn the ins and outs of the profession. Similar to law school, you learn what the laws are regarding agency and ethical conduct along with contract laws. Yet, you need additional training and experience out in the field to know and understand the nuances of your new profession.
Most new agents join a traditional commission split brokerage to learn the trade. Work alongside seasoned agents and help them with their lead’s generations, presentations, previews, open houses, advertising, and marketing their services. These skills are not taught in real estate licensing schools.
It’s like an apprenticeship. Learn from a master before you strike out on your own.
Once you gain enough experience and establish professional contacts and a client base, you are probably ready to move on to a 100% commission brokerage. There you will be a pure independent contractor but still under the supervision of a broker.
How 100% Commission Brokers Make Money?
Some 100% commission brokers make their money with all the fees listed above. They may make enough of a profit after paying for their office and staff just renting desks and small offices along with charging all those fees. These brokers act more like a landlord than a broker who cares for and supports his or her agents.
Tip: Your best bet is to find a 100% commission brokerage that has no hidden fees and provides free support and training services to help the agents succeed. After all, if the agents don’t sell then no commissions get earned for the broker too. Many 100% commission brokers know this and profit by helping their agents to prosper.
Therefore, most successful 100% brokers structure their fees as:
- Annual or monthly fee;
- Flat transaction fee for each closed deal; and
- E&O insurance at a reasonable price for each transaction protects the agent and the broker.
This is a “Win-Win” structure for the agent and the broker.
Want to Join a Win-Win 100% Commission Brokerage in San Diego?
Big Block Realty only offers a few transparent fees (no hidden fees) to all our Realtors. These include:
- $125 Administrative Fee per Transaction;
- $165 E&O Insurance Fee per Transaction; and
- 100% Commission Plans suitable for any budget.
Our 100% Commission Plans offer you three payment options:
- Annual = $3,600 one-time payment with 100% Commission on all Closings; or
- Monthly = $300 with 100% Commission on all Closings; or
- Per Transaction = $50/month + $1,200 on your First 3 Closings per Year.
Join us to see why 985+ Realtors in San Diego County make us one of the largest non-franchise brokerages in the country.
Steven Rich, MBA – Guest Blogger
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Call: (800) 550-3209
Big Block Realty – 100% Commission Real Estate Brokerage