“What is the best commission split?” This is a question that real estate agents often wrestle with when considering which company is the “right fit” for them. What commission split should you choose to achieve your maximum profitability? The answer is that it depends on the situation because how you pay your broker is often more important than how much at this stage. I’ll go over three of the best commission models in the industry and tell you which situation they are most applicable to:
1. Transaction fee model. This model provides agents with the basic brokerage services for a low monthly fee of between $35 and $75 and an additional transaction fee of between $250 and $500 when they make a sale. Services like marketing and training are not provided by the brokerage. This model has become much more popular in recent years due to improvements in cloud-based real estate software. Agents are left to purchase their own training, support, coaching, etc.
2. Split compensation model. This model started in the 1950s and is still the most common one used today. The brokerage takes on the role of marketing and attracting clients for agents for a low monthly fee and also gets a larger split of the commission. There are three types of split compensation models: traditional, graduated, and split to cap.
In traditional split models, brokerages get up to 40-50% of the commission revenue and often offer all-inclusive services. This is ideal for agents who do not want the risk of paying for all the up front services, products, and vendors needed to support oneself.
Graduated split models allow the agent to take an increasing percentage of the commission based on reaching certain GCI milestones. This may be preferred for agents who have inconsistent results – big months (peaks) then slow ones (valleys). They have a big month then watch that month’s commission revenue grow, grow, grow.
Split to cap models have agents splitting a set percentage of the commission until the brokerage’s split reaches a certain value, after which the agent keeps 100% of the commission. This model is popular because it supports multiple agent types. However, this model works best for agents who do large volumes.
3. Monthly fee model. This model has agents pay a set monthly fee to the brokerage for their services while keeping 100% of the commission. Again, this model forces the agent to pay for all their own supplies, training and coaching. And for big producers, the fee can get pretty hefty.
If you have questions about this topic, or if I can help you with anything else, don’t hesitate to reach out to me by phone or email. I look forward to hearing from you.
