Why are real estate agents attracted to 100% commissions?
A couple of years ago, the Palm Beach Post published a news story answering this question. Several real estate agents who switched from traditional split commission brokerages to 100% explained why.
Real Estate Agents Attracted to 100% Commissions for More Money
One agent described how he sacrificed brand recognition, leads, and office space for more cash. He switched from a 50% split brokerage. Working from his home, he pays a monthly fee along with a set transaction fee when a deal closes and an established fee for errors and omissions insurance.
After working as an agent for 20 years, he felt confident about working at home for more money. Some of his 100% commission colleagues work out of Starbucks or even their cars instead of a formal office. They reported being very happy with those arrangements.
A good example provided by the Post shows an agent collecting 3% for representing a buyer in a $300,000 sale. The $9,000 commission on a 70-30 split amount to the agent getting $6,300. In comparison, one of the local 100% commission companies would deduct $100 as a transaction fee and another $100 for insurance leaving $8,800 for the agent.
Real estate agents described that type of split “insanely generous”. After all, pocketing an additional $2,500 in the above example with a 100% Commission Company really benefits the agent.
Independent Minded Agents Thrive with 100% Commissions
Real estate agents are the epitome of true independent contractors. No salaries, no employment contracts, no pension plans, and no benefits.
According to the Post: “Realtors are the ultimate free agents”.
While traditional real estate brokerages began with 50% commission splits, gradually higher commissions evolved up to 70% and 80% splits. Their 20% to 30% went to the broker to pay for advertising, yard signs, training, and office overhead.
Recently, 100% commission brokerages rapidly increased in the greater Palm Beach, Florida area. Even though most of the 20,000 real estate agents in Palm Beach County remained working at traditional split companies, the 100% commission model was catching fire.
While some agents need the support provided by traditional brokerages, the truly independent-minded ones thrive under the 100% commission model.
Confident Agents Succeed with 100% Commissions
Some local brokers interviewed for this story claimed reluctance to accept the 100% commission model. However, the rising popularity of 100% commissions forced many to go along with them. Most feared being trapped in the traditional past if they didn’t follow the new trend.
Yet, the Post found that most local agents opted to remain with traditional splits. That’s because they preferred the structure that some traditional brokerages provided with sales meetings and office hours.
In the end, the Post concluded that the 100% commission model is better suited for agents with confidence in their abilities to be successful on their own.
Do Consumers Benefit with 100% Commission Model?
The Post was unclear whether consumers benefitted from using 100% commission brokerages. However, the Post reasoned that if agents made more money on every transaction they might agree to reduce their commission.
This points out that 100% commission real estate agents maintain flexibility with their commissions to benefit clients. Could make the difference with landing a new client.
Experienced Agents Flourish with 100% Commissions
Inman, (a real estate news outlet for agents, brokers, and investors) recently reported that while real estate agents are independent, they actually work for many clients.
A work from home professional usually controls his or her schedule, but real estate agents don’t. That’s because you can be enjoying a nice dinner when a client calls with an emergency. Or, a new buyer wants to see the home you just listed right away or he will call another agent.
Nights and weekends consume the vast majority of real estate agents’ time. This creates a dilemma by choosing family over the necessary time needed to succeed. If your spouse and kids are not on board with this type of schedule, it’s time to consider another profession if your family comes first.
Inman recommends that new agents start out with a more traditional commission split realty to take advantage of the office environment, equipment, training, office meetings, and comradeship with other agents. Lower overhead and less out of pocket expenses make up for the larger split going to the broker.
However, after two years most agents should begin to feel confident as an entrepreneur. Time to spread your wings and not be tied down with traditional brokerage ways. On the other hand, Inman claims that 80% of new agents won’t be in the profession anymore in two years. So, the 20% who survive the first two years should seriously consider advancing into a 100% commission model.
Inman knows that “experience matters a lot”.
In fact, after the first two years, real estate agents need to put that experience to work in order to earn higher commission splits and achieve success.
Real Estate Agents Earnings in 2018
Just how much does the average real estate agent earn in 2018?
According to Salary.com, the average earnings for a real estate agent as of October 31, 2018 is $41,163. It ranges between $40,210 and $52,356. For the past 20 years, Salary.com provides enterprise and consumer compensation data.
Sadly, this figure falls way below the average household income. In 2018, the U.S. median household income is $61,822. For your information, DQYDJ.com provides personal finance calculators and a popular finance blog.
If real estate agents average $20,000 less than the median household income in 2018, what can they do to increase their income in 2019?
The answer to this question is simple.
If you follow the recommendations by Inman and the Palm Beach Post, relocate to a 100% Commission Brokerage. Especially, with at least two years’ experience, being independent-minded, and confident.
Not All 100% Commission Brokerages Equal
However, not all 100% commission brokerages are equal. Some charge hidden fees. Others overcharge for their brokerage services. You can read more about these problems by Clicking Here.
Find one that has no hidden fees and transparent with all costs and charges.
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As you see, we provide more support and free training to help you prosper with our 100% Commission Model.
Steven Rich, MBA – Guest Blogger
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