What Is 100% Commission in Real Estate and How Does It Work? All Questions Answered
What Is 100% Commission in Real Estate and How Does It Work?
While some commercial and residential property owners will try to fly solo, working without a real estate agent is a massive challenge.
On the flip side, agents need to work with firms that support them and allow them to get paid for the hard work that they do. Lots of firms offer 100% commission but don't offer any support that helps agents make their sales or build their client base.
Here are the four most important questions to ask about a firm before you start working with them.
1. Are There Hidden Fees?
If you're a real estate agent, you need to know all about the hidden fee structure that's often embedded into a 100% commission sale. Hidden charges can turn off a buyer and change how much they trust you.
Some brokerages will allow you to net 100% of the commission as an agent, but they can't operate on the goodwill of their agents. They need to make something as well. This is where hidden fees come in.
Some companies will market the concept to attract agents, but leave out the potential of a "per transaction fee." That fee can end up being in the thousands depending on the market and the brokerage firm. This means that a $5,000 commission could end up netting the broker 40% of their commission, sending over $2,000.
Before agreeing to a 100% commission sale, ask about all of the fees. If you don't look over your contract carefully or don't lay out the expectations clearly, you could end up losing a lot of your commission.
Some realty groups will be much more straightforward with agents. They will confirm the flat fee that agents are required to pay. Firms need money to operate and so it's reasonable to have to pay a fee to get the information about properties and access to showing it.
2. There Are Insurance Costs
Every agent should be aware of whether or not the broker they're working with has E&O insurance. This insurance protects the people dealing with the property from being liable for poor communication or deception by the owner of a property before a sale.
If a seller tells you that a property has three floors, you sell it as three floors, and then on the day buyers arrive, they find two floors, you could be in trouble. E&O insurance will protect everyone in the middle.
While brokers will be self-insured most of the time, if they don't have this insurance, it could put you in a bind as an agent. You don't want to just cross your fingers and hope for the best when insurance could protect you.
Insurance is necessary for this industry and is essentially indispensable. If you're working with a firm that doesn't understand this, they're putting you in danger.
Real estate agents hurt their customers by not being insured. You should have insurance coverage that will prepare you for anything that could happen.
If you're expected to pay this as part of your "100%", you should be told about this up front. Since most firms will have this insurance, hiding it within the network of hidden fees is a common tactic.
3. Are There On-Site Coordinators?
Transaction coordinators should be available to you as an agent working with any kind of brokerage. Even if they've promised that they're a 100% commission firm, you should avoid working with them if they don't have a coordinator on hand. You need support to close your deals.
A reputable brokerage that doesn't have someone on-hand will have someone who they prefer to work with. This coordinator should be employed by one single brokerage and its agents.
If you sign on with a firm that doesn't have a single dedicated coordinator, you should reconsider working with them. Since a reputable brokerage has more than enough work for a transaction coordinator to do, there's no reason for one to be on "contract". If they hold a transaction coordinator on contract, you won't get the value you need.
Find a firm that has staff in-house at all times to handle issues. If you're a top producing agent, this is an absolute must.
4. What's the Work Culture Like?
Pay attention to the amount of staff on hand. It might not seem like a big deal but it can indicate several points about the firm you've walked into. Lots of administrative workers on hand means that there's support for agents.
If you're forced to handle all of the administrative work on your own, seek out a firm that can support you better. If they're offering you a 100% commission, it's likely that they're going to try to make staffing cutbacks. They might even charge you a fee for your desk space at their office.
If you're handling larger transactions or commercial sales, you're going to need meeting spaces and conference rooms. Without this support, you're going to struggle to be taken seriously as an agent. While you might get 100% of a theoretical commission, there's no commission in store for someone who doesn't make the sale.
Marketing, training, and administrative support are essential to growing as an agent. Before you become a household name, you need to have some support in attracting clients.
Firms with high turnover who treat their staff like mercenaries won't be able to grow. They might want a percentage of your commission fee, but if they're offering no support, what's the point in paying them your hard earned dollars?
100% Commission Isn't a Pipe Dream
While you may find that 100% commission deals have their own hidden costs, tenacious and productive real estate agents make them work. If you're ready to work independently, have a lot of drive, and find the right firm to support you, you'll make huge profits when you take home full commissions.
Not all brokerages are created equal, so check out our latest guide for more info.