When first starting out in real estate, most agents have some big ideas about the huge commissions that will soon be coming their way. However, they quickly realize that there is a significant difference between the gross commission income (GCI) on a transaction and the actual payment to the individual agent. In the case of a real estate team commission split, there may be even more sticker shock.
It is important to understand how to manage your expectations and how to negotiate the most favorable commission split when you align yourself with a real estate team. There are a variety of scenarios and models to choose from, so you’ll have plenty of guidance as you formulate your ideal plan.
What is a real estate team commission split?
You are probably familiar with standard real estate splits when working as a single agent. However, when you are working with a team, you’ll have to split your commissions further in order to compensate various support staff and pay for some of the team benefits. For this reason, it is wise to think in terms of the volume that results from working with an effective team rather than focusing on the reduced commission on each transaction.
For many up-and-coming agents, working on a well-run team offers a number of benefits that offset the increased commission split, including:
- Lead Generation: Many successful teams generate a large number of leads through better marketing initiatives, a strong online presence, and more word of mouth.
- Support Staff: Teams often employ both administrative and transaction support as well as ISAs to nurture leads before first agent contact.
- Market Visibility: A strong team leader may have a high profile and significant influence in the local market, resulting in far more transactions for the members of his or her team.
Thus, while you are paying more, remember that you are benefitting in many ways that individual agents do not. It is important for everyone on the team to contribute financially to the efficient functioning of the team.
How to split real estate team commissions
Just as with individual agent splits, there are a variety of scenarios for real estate team commission splits. Much will depend upon the size of the team, the size of the support staff, the split the team leader has negotiated with the brokerage, and your individual experience level.
Agents vs. Brokers
Agents and brokers have different needs and provide different strengths during a real estate transaction. Depending on the brokerage model, their compensation, expenses, and responsibilities can vary greatly.
How do brokers split commission?
There are a variety of ways that brokers can be compensated over the course of a real estate transaction. In a small indie brokerage run by a broker owner, for example, the broker may take a percentage of every commission. In a large franchise, the broker may be compensated through a combination of commission and salary, or even through salary alone.
Just as the team lead provides resources to his or her team members, a managing broker provides additional resources and oversight to everyone within the brokerage. From running the operations to the management of support personnel, the broker is responsible for much of the day-to-day functioning of the entire brokerage office.
How do agents split commission?
Agents generally split commission based on a percentage plan agreed to when first joining the brokerage. This split may stay the same or may vary according to performance. In addition, a seasoned agent may be able to renegotiate their commission split after years of consistent, significant production.
A top producing agent can then increase his or her impact and streamline operations by starting a team and bringing on less seasoned agents. This allows a mega-agent to complete hundreds of transactions per year without having to personally oversee each one. For younger agents, it provides built-in mentoring and lead gen as they build their business and reputation.
Best commission split strategy
The best commission split strategy depends on your individual situation. For example, an experienced agent with a huge sphere of influence and a fair amount of independence may want to negotiate a higher split, knowing that he or she will be able to generate and manage a significant number of transactions each year.
A less experienced agent or one who has recently moved to a new market may be willing to take a lower percentage in exchange for built-in marketing and lead gen that can help ensure consistent income while he or she is establishing a presence in the local market.
Typical real estate commission split
There are a variety of commission split scenarios to explore, including the following:
- 100% commission: For well-established agents, a 100% commission may involve monthly or per-transaction flat fees in return for no commission split with the brokerage. Agents on a 100% commission split generally get no support services provided by the brokerage and are responsible for all costs of doing business.
- 80/20 commission split: This common commission split means that 80% of a commission goes to the individual agent, while 20% goes to the brokerage. In addition, many agents on this plan are required to pay significant monthly or per transaction fees in exchange for facilities and limited administrative support.
- 50/50 commission split: This is perhaps the most common commission split, Frequently, 50/50 splits include desk fees, administrative support, and additional benefits like training or marketing platforms and materials.
Examples of Different Commission Structures
Different brokerages follow different split models, in addition to individually designed splits that depend on agent performance. Here are a number of standard splits for the largest real estate brokerage franchise companies.
- Keller Williams: Keller Williams’ model involves a 64/30/6 model with 64% going to the agent, 30% to the brokerage, and 6% to the company. In addition, agents can participate in profit sharing when they recruit other agents and are able to cap their split annually if they are completing a large number of transactions.
- RE/MAX: RE/MAX offers a variety of models including 95/5, 80/20, 70/30, and 60/40 splits. The higher the agent commission, the more they generally have to pay in upfront desk fees and the fewer services they can expect to receive from the brokerage..
- Coldwell Banker: CB has a variety of commission splits, with 60/40 being the most common. In return, they offer a great suite of technology tools along with training to help agents use them effectively.
- Sotheby’s: Because Sotheby’s operates internationally, it is difficult to find consistent commission split numbers for their agents. In addition, there is often a fair amount of variability among luxury agents and teams, and these make up a large percentage of Sotheby’s agent roster.
- Century21: For new agents at Century21, there is usually no desk fee in return for a 50/50 commission split. This is based in part on Century21’s significant brand recognition, which often generates a larger number of buyer and seller inquiries than other franchise companies. Higher producing agents can negotiate more favorable splits as they build their businesses and increase their number of closed transactions per year.
When you work with a team coaching expert like Goodfellow Coaching & Consulting, we help you determine a commission splitting strategy that will best serve you and your hard working team members. To learn more, fill out our Business Evaluationtoday and one of our coaches will be in touch to help get you to the level you’ve always dreamed of.
