100% Commission Real Estate Broker Guide for 2022
How to choose the best 100% commission real estate broker in 2022. The ultimate guide for real estate agents comparing 100 percent commission companies vs traditional real estate brokerages.
What Are the Advantages and Disadvantages of 100% Commission Real Estate Brokerages?
If you’re a real estate agent who isn’t a licensed broker, that means you must work with a licensed broker rather than working entirely for yourself. Therefore, the most important factor in determining how much money you make as a real estate agent is the commission split offered by your brokerage.
And there is a distinction between gross commission income (GCI) and net commission income (NCI). GCI is what your brokerage receives when you sell a home, whereas NCI is what your brokerage pays you. To put it another way, NCI is actual agent take-home pay.
What Is The Definition of 100% Commission Real Estate?
The 100% commission real estate is an arrangement where real estate agents can earn the greatest money. Have you considered leaving your current brokerage model and transitioning to a 100% commission?
If you learn that standard brokerages aren’t the ideal fit for you, maybe you should consider the 100% commission real estate. It’s also ideal for a brand-new real estate agent who wants to increase your revenue quickly.
This is your comprehensive guide to comparing 100% commission split brokerages vs standard real estate brokerages. This guide will help you determine whether being a 100% commission real estate agent is perfect for you.
How Much Do Real Estate Agents Make?
How much do real estate agents make per sale, and why is 100% commission real estate becoming more popular among agents and brokers?
Do Realtors Keep The Entire Commission?
The commission split has the greatest influence on how much money a real estate agent makes. A commission split, sometimes known as a “split,” simply explains how gross commission money is divided between a brokerage and its agent after a real estate transaction closes.
When a property is sold, the brokerage receives gross commission income (GCI). GCI is chopped up at traditional real estate brokerages, the real estate brokerage takes a share and also collects some additional fees. Then, whatever is left over is kept by the agent as net commission income (NCI), or real estate agent take-home pay.
Let’s Do The Real Estate Agent Transaction Calculation
Commission splits in the conventional real estate brokerage model can range from 50% to 90%. That means the agent receives 50% to 90% of GCI, depending on a variety of variables. Real estate brokerage commission splits are frequently represented as two numbers, such as 90/10, 70/30, or 50/50.
What do these numbers mean?
- 90/10, which means the real estate agent keeps 90% of GCI and the brokerage keeps 10%.
- 70/30, which means the real estate agent keeps 70% of GCI and the brokerage keeps 30%.
- 50/50, which means the real estate agent and the brokerage each keep 50% of GCI.
Some companies, such as Keller Williams, use a combination of a commission split and a “cap” system. The system allows all deals an agent closes to fall under a commission split, for example 70/30, until the agent has paid the brokerage a certain amount of money. At that point, the agent “caps” and goes to 100% commission. The dirty little secret of a cap system is that the cap resets every year and even after you cap, you still need to pay some fees.
Examples of Real Estate Agent Commission Splits
The majority of real estate agents find closing multi-million dollar deals to be fascinating. When you made the decision to become a real estate agent, did the thought of collecting five- and six-figure commission checks cross your mind as well?
Below is an example of real estate agent commission splits:
An agent closed $1,260,000 for a house. The GCI for that transaction was $25,200. Running that through a few different commission splits:
- 90/10: The agent keeps $22,680 and pays $2,520 in brokerage.
- 70/30: The agent keeps $17,640 while the brokerage receives $7,560.
- 50/50: The agent keeps $12,600 and the brokerage received $12,600.
So how much did the agent actually make on this deal?
Watch the video below about real estate agent’s net salary and how a commission split works:
100% Commission Real Estate Is Getting Popular – Why Join a 100% Brokerage?
Joining a 100% commission real estate company is becoming more and more appealing for real estate agents for a variety of reasons. Modern real estate agent technology has sped up the process, and the pandemic revealed the truth that an office and the typical trappings of a traditional brokerage are simply not necessary.
What Makes 100% Commission Real Estate Brokerages Unique
What are the advantages and disadvantages of working for a 100% commission real estate firm in 2022?
When comparing 100% commission real estate choices, it’s vital to consider what each brokerage truly offers: some 100% commission firms offer more advantages than others. Then rank what matters most to you as an agent, keeping in mind how 100% commission brokerage fees compare to those of traditional brokerages.
Consider the Benefits and Drawbacks of Each of the Following When Deciding to Join a 100% Commission Program Brokerage of Real Estate
- Real estate prospects
- Real estate brokerage assistance and education
- Fees for real estate agents
- Flexibility in commission and agent business models
- Brand recognition and consistency
- Technology for real estate agents
- Work from home office flexibility
- Flexibility in the commission and agent business models
Have you ever done the math when watching a show like Million Dollar Listing? Most people do the math by taking the sale price, multiplying it by 1%, and then doubling or tripling that figure. And they assume that’s how much money you’d make if you sold one of those New York City or Los Angeles homes.
However, that is not what really happens. You know that it’s not how typical real estate works.
The concept of “commission split” with your brokerage exists, and depending on which brokerage you affiliate with, the brokerage may take up to 50% of your commission!
Is it true that real estate brokers keep the entire commission? No, unless you work with a 100% commission brokerage.
Many typical brokerage agents don’t have enough money to sustain their families and reinvest back into their firm, let alone pursue Financial Independence Retire Early (FIRE) for real estate brokers due to commission splits.
The 100% commission real estate brokerage allows you to reinvest in your business while also sustaining yourself and your family.
Working on a 100% commission basis allows you to work less, make more, and achieve greater success.
Most 100% commission brokerages provide agents the freedom to create the kind of real estate firm they want, in contrast to traditional real estate brokerages that are inflexible and have a lot of bureaucratic monitoring. To compete and prosper, agents require flexibility, creativity, and authority to find their expertise and organize their real estate agent firm as they see fit. With 100% commission brokerages, you may often set your fears and hesitations aside since the world needs your unique ideas.
The 100% commission provides you with the flexibility and support from your brokerage to create your own creative programs. A Buyer Rebate is one the example of creative and innovative program.
Fees for Real Estate Agents
How do 100% commission brokers generate money?
The100% commission real estate brokerages require agents to pay some fees. There are several models for how fees are structured. And in general, there is a wide variation in the total annual dollar amount an agent will pay in fees across 100% commission brokerages.
The most common 100% commission real estate brokerage fees are as follows:
- Monthly and/or yearly charges
- Fixed transaction cost per completed deal
In the end, an agent working for a 100% commission brokerage can anticipate paying costs similar to those listed here. These fees may be paid in full or in part, but this is how 100% commission real estate broker will profit.
Some 100% commission brokers will charge agents in one or both of the above-mentioned ways, as well as additional costs disguised as errors and omissions (E&O) insurance riders dependent on the size of the deals you close. Additionally, be wary if the brokerage is not completely honest with its fee structure upfront. This is ridiculous, but it does happen.
Despite this, 100% commission real estate broker costs are so drastically different from standard brokerage fees. Agents are crushed by an unending wave of error fees.
The following are some examples of traditional real estate brokerage fees. They are all independent of commission splits and any resetting cap systems.
- Administrative fee
- Brand fee
- Franchise fee
- Setup fee
- Errors & omission (E&O) insurance fee
- File review fee
- Technology fee
- Training fee
- Compliance fee
No two real estate brokerages charge the same fees. Not all traditional brokerages utilize a cap system, and not all full-service brokerages charge a transaction fee.
You owe it to yourself to do the math if you’re serious about generating a lot of money as a real estate agent.
Determine What’s Appropriate
To determine which real estate brokerage is appropriate for the agent you are today and the agent you want to be tomorrow, look at your production level from earlier years, both GCI and NCI, and run the figures through each brokerage’s business model. Make sure the brokerage you choose has the ability to “upgrade” or move to more lucrative models that have lower fees to further enhance your revenue as you develop your own hyper-local brand and become less dependent on a brokerage.
Finally, there appears to be an undertone of anxiety and concern in the arena of costs regarding errors and omissions (E&O) insurance coverage for agents and brokers. If you’re a real estate agent and you’re hearing E&O propaganda, question the veracity of what you’re hearing and root yourself in facts.
There are only a few possibilities for brokerages to obtain E&O coverage. Thus the idea that brokerages have a lot of options and make obvious distinctions between what is thought to be “minimum coverage” and “A rated” coverage is ridiculous. Brokerages typically purchase E&O coverage from carriers affiliated with either the National Association of Realtors (NAR) or their state association. These E&O providers have been thoroughly vetted, provide extensive coverage, and offer competitive pricing due to their large size.
Furthermore, real estate agents who are concerned about whether they will be protected and offered legal counsel in the case of a complaint or litigation simply do not understand how E&O works. Brokerages need to tell their E&O provider of a complaint or a lawsuit, and the brokerage does not then go out looking for “excellent representation,” rather the E&O provider engages legal counsel that is prescribed to a brokerage and the agent initiating the complaint.
Real Estate Agent Leads
Most real estate agents, especially newly licensed agents, are anxious about where and how they will obtain clients. They are struggling with the thought of investing upfront costs to buy leads.
These two things create a false assumption that you must receive leads from your broker in order to succeed.
In the case of Zillow leads, some agents pay several hundred dollars in effective cost per lead. On the other hand, you may anticipate paying roughly $37 per online lead from a quality online real estate lead generation source. By the way, none of these real estate leads are qualified over the phone by an inside sales associate (ISA).
A lot of traditional brokerages give off the impression that they create a ton of online leads and send them along to agents. Also, there are a lot of traditional brokerages snare new agents by utilizing the concept of lead transference as justification for tying you to an unfavorable split.
You need to be very explicit with your broker about leads so that you can discuss them with your eyes wide open. Brokerages often make soft promises about leads, and agents often have correspondingly high expectations.
Stability & Brand Recognition of Real Estate Brokerage
The U.S. Bureau of Labor Statistics (BLS) reports that roughly 20% of new enterprises fail within the first two years of operation, 45% fail within the first five years, and 65% fail within the first ten years. Only 25% of new enterprises survive for 15 years or more.
Statistically speaking, the odds aren’t excellent. The 100% commission brokerage you’re contemplating will actually be around long enough for you to make the greatest money as a real estate agent.
Long-term corporate stability is the best indicator of future success.
You probably already know whether you’re willing to work for a 100% commission brokerage rather than a big-box name. Consumers do not select an agent based primarily on the brokerage name which has a collaboration with the agent.
On the other hand, if you pay brand and franchise fees on a monthly basis, that means you’re sending a message with your own money. Also, you support the idea that the brokerage brand name is important.
If you choose to work for a 100% commission real estate agency, go with one that has worked hard to build a strong brand. Plenty of “boutique” brokerages have many agents that are crushing it. Also, buyers and sellers will do business with agents that they know, like, and trust. Join a reputable brokerage, but be wary of the myth that affiliating with a big-box brokerage is the only way to be successful.
Technology for Real Estate Agents
So, you will require a real estate website and some leads.
I spent numerous hours with top producers and the greatest real estate marketing technology companies to reverse engineer how real estate agents genuinely develop their businesses.
I learned that effective agents perform two simple things that other agents do not:
- Control and own their hyper-local specialty website and brand.
- Diversify your lead generation efforts.
Of course, this is all done online.
Many top-performing agents vary their strategy and develop their own organic leads. They say that leads they generate on their own are higher quality, more qualified, and have a much lower effective cost per lead.
Top producing agents are utilizing social media. Many agents are active on Facebook, and others are even dabbling in real estate videos. You must select your locations and make use of the vast distribution possibilities of social media platforms. However, you must understand that you do not own or control big social media platforms. Your audience may be snatched away from you in an instant.
That’s why, in addition to social media networks, top-producing agents have their own websites. They own and manage the websites to collect leads and establish an email list. Thus, they can always communicate with their audience.
Although embracing the real estate agent tech stack may not be for everyone, it’s worth considering if you want to “run a business like a business.”
Truth About Technology
The truth is that how your brokerage views technology and automation affects not only how effective you are. It also affects how you feel overall. To help agents in expanding and scaling their companies, they need to find out what cutting-edge tools a brokerage offers. The agents also need to figure out how devoted the brokerage is.
Modern virtual real estate brokers have enormous untapped potential to leverage creative real estate industry vertical collaborations. The collaborations produce win-win-win scenarios for real estate agents, brokerages, and real estate industry service providers. Is your brokerage in the lead here?
If technology is essential to you, and it should be, evaluate a brokerage’s attitude toward technology, innovation, and automation. It should be fairly obvious if the real estate brokerage is a forerunner in assisting you to become a modern hyper-local data-driven real estate agent. Or if the brokerage is a Luddite or at best a laggard. Also when the brokerage is content with the status quo, that often serves the brokerage’s brand rather than your own as an agent.
Work from Home Real Estate Agent (WFH) Flexibility
We all work best in different surroundings. Some agents believe they need to be in an office, while others say it’s a waste of time and an unnecessary overhead expense that they’re paying for with a charge.
But the truth is:
- Internal training and collaboration can be accomplished remotely by agents.
- Agents can manage their entire operation from a mobile device.
- Clients are no longer met at an office by agents.
Although not every 100% commission real estate broker business is a virtual real estate agency, most do their whole business online.
One unsavory expectation that conventional real estate brokerages have of their agents is that they will be continually micromanaged. They will also have to be present in the office. This expectation applies to any brokerage whose business strategy is about taking a commission split.
A 100% commission brokerage may be a good fit for you if you are self-aware. Also, you need to realize that you need to work in a traditional office environment to be successful and happy. Given that almost all 100% commission brokerages are online real estate brokers, this may be the most obvious indicator for you to use.
Real Estate Brokerage Support and Training
It’s critical for you to evaluate the level and caliber of training, support, and accessibility you may anticipate from your brokerage as a real estate agent. Also, you need to determine whether this fits with your personality and preferred method of learning and development.
To evaluate a brokerage, however, first requires that you evaluate yourself and develop self-awareness.
You can take a personality test to develop your self-awareness. A personality test will give you an insight into yourself.
Discovering your personality type can help you become much clear and grasp the “why” behind what and how you work. It will make it easy for you to assess whether the services that a real estate brokerage offers are a good fit for you on a fundamental level. It will also enable you to experience significant personal progress.
To be clear, if you’ve never closed a real estate transaction on your own, you need the training. However, the training you’ve heard about isn’t what you need.
When you try to learn about self-awareness, do you need to sit in a real classroom setting in an office atmosphere to learn new things? Or is self-paced on-demand video training content better for you?
To different agents, community, mentoring, and networking mean different things. You can do these things online by 100% commission brokerages. They are mostly online virtual real estate companies, as previously described.
Traditional brokerages should expect agents to have a managing broker at their disposal because they pay for it in fees. Since you aren’t paying for that with 100% commission real estate brokerages, you should consider whether the tools in which the online real estate broker interacts with agents are appropriate. You can test this by having a basic conversation with the agent of a 100% commission broker. You need to find out if they are reachable and responsive.
The Rise of the Next-generation 100% Commission Real Estate Broker
There is a rapid decline in the traditional real estate brokerage status quo. However, you need to work hard to increase transparency around real estate agent commission, splits, fees, and respect for agents’ time.
Nonetheless, agents need more flexibility than ever before. The 100% commission model provides this flexibility without giving up significant amounts of their fee.