So, you’re interested in Keller Williams and you’re wondering what Keller Williams commission split is. Great, we’re going to break down the commission split, it’s benefits, and it’s disadvantages.
Keller Williams offers a unique opportunity for a specific kind of agent to maximize their take home pay and minimizes commissions paid to the broker.
While I personally choose to hang my license with Exit Realty, I still believe Keller Williams has value for some agents. If it didn’t, the company would no longer exist. Exit Realty has its own unique benefits over Keller Williams that we will discuss.
It’s never a question of which brokerage is better, but which sponsoring brokerage is better FOR YOU.
Split structure
Keller Williams has a competitive split structure for real estate agents. They offer a 70-30 split. Meaning, 70 percent of the commission will go to the real estate agent and 30 percent will go to the brokerage.
In addition, a real estate agent will pay a six percent franchise fee for each transaction up to $3,000.
For that reason, the split can be thought of as more like 64-30-6 — where 64 percent goes to the agent, 30 percent to the broker, and six percent to the franchise.
The commission split does shift to 100 percent once a real estate agent is able to cap. The cap is a yearly amount that an agent reaches and then is no longer required to pay the broker or franchise a split.
Here’s an example of how this might look: Agent Mindy earns $9,000 in commission from the sale of a home. 30 percent, or $2,700, goes to the broker, 6 percent, or $540, goes to the franchise company. Mindy is left with $5,760, or 64 percent.
If Mindy happened to cap for the year, she would be able to keep 100 percent of the commission, or $9,000. The cap does reset every year.
What Is The Keller Williams Cap?
Keller Williams also offers a cap on commissions paid to the office. Meaning, real estate agents won’t pay more than a certain dollar amount to their broker and Keller Williams franchise.
The exact cap that an individual Keller Williams broker offers is dependent on economic conditions, operating expenses for the market center, and the median home value in the area.
Generally it works out to be around 8 to 10 homes per year. However, this is a rough ballpark number and can be higher or lower in your area.
In my area, the cap is around $25,000 at Keller Williams. This works out to about 13 homes in my area. That’s significantly higher than the average for most Keller Williams offices.
Is It Easy To Hit The Cap?
While the company offers the cap, it’s not as easy to hit as many people think. The average real estate agent, according to the National Association of Realtors, completes 10 transactions every year.
If you hit the average and are part of a market center that requires only 8 homes sold to cap, then you will enjoy the benefits of a capping commission model.
If on the other hand, you’re in a market like mine and you only hit the average, you won’t hit the cap.
On top of this, the average number of homes sold looks at all real estate agents across all levels of experience. The reality is that newer or inexperienced agents (those with less than three years) have a much lower average than the total average.
The average new agent won’t be able to cap in their first year. There are, of course, agents who defy these odds. I was one of them.
But, we’re mostly outliers.
Keller Williams Hidden Fees
While the company does offer a cap, Keller Williams, like most real estate brokers, have additional fees. There are errors and omissions (E&O) insurance fees on every transaction, regardless of capping status. It ranges from $40 to $75 depending on your market center.
You can also anticipate regular monthly fees for an office desk, technology fees, and other fees. These can be in the range of $60 to $80 per month. The Keller Williams in my area also has miscellaneous usage fees. For example, it will cost you extra money to print anything and that increases if you decide to print in color.
There tends to be some free training offered at the company, but a lot of training may require a fee. For example, their BOLD training program will often cost you money.
How Keller Williams Profit Sharing Works
In addition to a Keller Williams commission split, the company offers a profit sharing program. The program attempts to financially reward real estate agents for growing their market center by recruiting and sponsoring real estate agents into the company.
It’s an opportunity for real estate agents to create an extra stream of income and scale their business without working more. On paper, it’s an excellent opportunity.
An agent that directly sponsors another agent will get a share of the market center’s profit. The amount of profit shared is dependent on the sponsoring agent’s production and contribution to the company in relation to the total company dollars generated by that market center.
Company dollars are defined as the money that is left over after paying real estate agents and the Keller Williams franchise fee. It’s made of commission income and fees. Anything that an agent pays the market center.
Keller Williams profit sharing program is seven-levels deep, providing opportunities to earn profits from your sponsor’s sponsor.
For example, you recruit Jim into the company. Jim then recruits Chris into the company. You get a percentage of profit generated by Chris. Although, the amount is much smaller than what goes to Jim, who directly sponsored him.
Let’s look at the profit sharing program with numbers.
Profit Sharing Example
Assume agent Joey works for a market center that generates $300,000 in market company dollars. The Keller Williams runs a fiscally tight ship and generates a profit of $125,000 per year.
Out of that profit figure, 52 percent will go to the owners and 48 percent will go into the profit sharing pool, where it is eligible for being distributed to agents.
So, how do you find out how much goes to a specific agent?
Joey sponsored Dani into the company. Dani is a productive agent in her first year and paid the broker $15,000 in commissions and another $4,500 in various fees. A total contribution of $19,500.
The total contribution made by Dani is divided by the total company dollars to find a profit share factor. It’s essentially the percentage of company dollars that are a result of Dani’s production and fees paid to the company.
In our example, we get a profit share factor of 0.065.
With the profit share factor, we can determine how much will go to Dani’s branch of sponsors. Take the profit share factor and multiply it by the total profit for the year.
0.065 x $125,000 = $8,125
The result is that $8,125 will be distributed to Dani’s branch of sponsors. Specifically, a large portion (50%) will go to Joey because he sponsored her into the company.
In our example, Joey would get $4,062.50. The remaining 50 percent from Dani’s branch would go to Joey’s sponsor, his sponsor’s sponsor, and so on, all the way to what the company considers seven-levels deep.
On paper, that’s not bad if you can successfully sponsor agents into the company and they are able to successfully sell homes.
Is Keller Williams A Pyramid Scheme?
It’s the profit sharing program that often leaves people asking if it’s a pyramid scheme. I wouldn’t call it a pyramid scheme so much as I would call it an incentive for recruiting agents into the company and helping a real estate broker grow.
Pyramid schemes are usually built around payments for enrolling others into the business, rather than supply products or services.
Keller Williams isn’t a pyramid scheme because you don’t make money from an enrollment fee, or something similar, when an agent joins the company.
You only earn a portion of the profit when the agent you sponsor into the company is successful in selling homes. Not from recruiting more people into the company.
Is The Keller Williams Commission Split Right For You?
A common question prospective real estate agents ask is “what’s the Keller Williams commission split?”
The reality is that it doesn’t really matter. I always say that 100 percent of zero is still zero. Meaning, you can have the best commission split in the world, but it doesn’t matter if you can’t make any sales and get clients.
Your sponsoring broker’s training, support, technology, and tools are far more important. It’s not just about your commission split.
It’s my belief that Keller-Williams doesn’t offer the kind of support to help new real estate agents or those with minimal experience succeed.
Anecdotally, Keller-Williams is one of the lowest brokerages on a productivity per agent basis. Meaning, the average agent at Keller-Williams sells fewer homes compared to those at other real estate brokers.
Now, this doesn’t mean every Keller-Williams market center will be lower than other brokers in the area.
I often hear a lot of Keller-Williams’ agents object with me at this point. They say, “look at all of these top producing agents we have at the company. We have the most top-producing agents at any company.”
To that, I’d say you’re making a fatal assumption.
The Fatal Assumption With Keller-Williams
Real estate agents that join Keller-Williams and either fail in the system or change brokers, often make a single fatal assumption.
They assume that correlation equals causation.
There are a lot of high-producing successful real estate agents at Keller-Williams. I’m talking about agents that produce $20-, $30-, $80-million, and more in sales volume. They sell hundreds of homes a year.
So, because they see these agents at Keller-Williams, they automatically assume that Keller-Williams’ systems, training, and resources empowered their agents to create this much production.
Nope. You would be making a fatal assumption.
The reality is more likely that Keller-Williams commission split naturally attracts top-producing agents. It’s about basic unit economics.
If an agent is producing $400,000 in gross commission income, they are going to work for the brokerage that offers a commission cap at $20,000. It doesn’t make financial sense to work at a broker with a low agent-split, like 70-30. This agent would pay $120,000 to the broker rather than only $20,000
Imagine if the revenue number is closer to $1-million. Are you going to want to pay $20,000 or $300,000? I’d hope you want to only pay $20,000.
Just because two things are correlated — high-producing agents who work at Keller-Williams — doesn’t mean they are causative.
It’s not Keller-Williams that creates successful agents. It’s the agents themselves.
The high-producing agents there tend to be people who are very self-driven, motivated, love sales, and have a talent for business.
Put these kinds of agents in any real estate broker and they are likely to succeed at a high-level. It doesn’t matter where they are, they will be top-producing agents.
The Profit Sharing Problem
There is one main problem I see with Keller Williams profit sharing program. First, the incentives can cause poor decisions to be made. Agents and owners will focus on the profits over the long-term success of the company, and this may cause the business to suffer.
Placing focus on the profits can lead to owners and agents not investing into the brokerage. This leads to outdated systems or dysfunctional websites. A Keller Williams in my area is a perfect example.
Their focus is on generating immediate profits for their agents. As a result, they haven’t made investments into their website since the early 2000’s. Buyers are continually shifting online, and yet, the company chooses to retain profit rather than developing a website that could help agents generate more leads, close more sales, or aid in recruiting.
Of course, not every location will be like this. Some will understand that they need to invest in the company. Just be aware of the potential negatives of profit sharing.
Exit Realty: An Alternative
If you like the Keller-Williams commission split, the cap, and profit sharing, you may like Exit Realty, an alternative to Keller-Williams.
Exit Realty’s commission split is 70-30 and offered to all of their agents, just like Keller-Williams. They don’t have a cap, which shouldn’t matter since few people actually hit the cap.
However, Exit Realty does offer a 90-10 split after you produce $100,000 in gross commission income. For example, if you are a top-producing agent and you generated $200,000 in gross commission income, then you will pay 30 percent on the first $100,000 and only 10 percent on the second $100,000.
The company has lower agent fees, for example. There are no ongoing, regular desk fees that have to be paid. It’s common to be nickel and dimed at Keller-Williams — from printer fees to office rent. Exit Realty doesn’t have that.
They aren’t without fees, though. You may experience transaction or insurance fees at some Exit Realty offices.
For new agents or agents with less than three years of experience, a low fee company is a great option. It helps them keep more money in their bank account or use the money for marketing so they can get clients.
Better Than Profit Sharing
Do you love the idea of profit sharing? Then, you will love Exit’s earning opportunity for sponsoring people into the company. It’s called the Exit formula.
Profit sharing always sounds great in theory, but you’re relying on the competency of your management in the brokerage. You only get a share of the profits if there is a profit.
It’s not much of a profit share if your Keller-Williams market center isn’t fiscally responsible and produces minimal to no profit.
Plus, you only get the profit share if you stay with the company.
At Exit, a percent of the bonus gets paid to you after you retire and leave Exit. It’s even still paid to your beneficiaries if you die.
Instead, when an Exit agent sponsors another agent into the company, the agent is paid 10 percent of the gross commission income, up to $10,000, produced by the sponsored agent.
Example: Agent Alex sponsors Kyle into the company. Kyle goes on to produce $70,000 in gross commission income. Alex will be paid $7,000 from Exit Realty Corporate. Not from Kyle. He still gets to keep his 70 percent.
It gets better though. The sponsoring program isn’t location specific. For example, an agent in Michigan can sponsor an agent in California. Keller-Williams’ profit sharing program is only good if you sponsor agents in your specific brokerage.
So, the problems with Keller-Williams’ profit sharing are the fact that you have no control over the profit, you have to wait three years for eligibility, and it’s location specific.
Exit’s program on the other hand is one you can control, you are eligible on day one, and it’s not location specific.
Conclusion
In the end, you need to find a broker that is the best fit for you. If you’re able to handle low-support, minimal guidance, and are self-driven and motivated to produce more than $100,000 in gross commission income, then a place like Keller Williams may be right for you.
However, if you want to be part of a family-culture with significantly more support and that cares about the well-being of its agents — mentally and physically — then a company like Exit Realty is a better fit.
