What is 100% Commission Real Estate?
As a real estate agent who has worked with a brokerage for a long time, you have probably grown so accustomed to the typical share of commissions that seeing ads for 100 percent commission real estate through some brokers or firms is a little disconcerting. How is it possible for these companies to offer 100 percent of the profits on a sale to the agent? What is the trade-off with this newer real estate business-broker model? Are there any catches with the commission structure of a real estate company like this? Here's a closer look at the details and why you really should care about 100 percent commission real estate if you are an agent.
100% Commission Real Estate Still Means Fees, But They're Low
The 100% commission real estate brokers who have already made the change over to a company that offers this seemingly unheard of bargain still have fees to pay with every sale, but those fees are insanely low. For example, if you would have normally had a 70/30 commission split with a broker, a $9k commission would mean $3k to your broker. When you are working with a full commission company, you may only have to pay something like a $499 or even $195 transaction fee with every home sale and maybe a monthly fee that is just as conservative.
What's the Trade-Off for the Higher Commission?
This is where the rubber meets the road for seasoned real estate agents. Garnering 100 percent of your commission sounds impossibly great, so what's the catch? After all, the brokerage also needs to make money. If you were to transition from a typical agency to a 100% agency, you would see a few major differences right off the bat, including:
You will not have an office at the brokerage. If you want office space, that is up to you.
You will not have access to extensive training or industry meetings organized by the broker.
You will be responsible for things like buying signs, posting ads, and home showings. But this isn’t very different from traditional commission real estate brokerages.
In general terms, the broker is capable of charging so little because there are less moving pieces with a virtual brokerage. Therefore, their overhead costs are much lower, and they can afford to settle with a basic transaction fee per sale instead of a hefty slice of sales commissions. Some companies charge a monthly fee, while others give agents an option to choose a commission structure that best suits them.
What About the Advantages of 100 Percent Commission Real estate firms?
The primary advantage is, of course, the money you get to keep with every property sale. Instead of handing over part of your commission every time you do sell a property, you get to keep that money for yourself minus transaction fees, which is a considerable difference in income.
The second biggest advantage is you get to become your own self-reliant business owner. Even if you were under contract with a brokerage as a self-contractor before, there would have been strings attached and limitations to consider. With the 100 percent commission real estate setup, you are more like your own free agent, able to set your own schedule, showings, and appointments. Therefore, you have greater flexibility in how and when you work, what you charge, and how you operate overall. A few other things that are worthy of considering include:
Complete transparency of what you pay the brokerage to do
No pressure to use in-house brokerage services
Sales and industry training when you need it; not on the brokerage's terms
No sales quotas to contend with to fulfill a contract
The flexibility to build your own brand as a real estate agent
Some 100% commission real estate brokers still offer the same or similar services that a traditional broker would offer, but the services are posed as an option instead of as a mandatory part of a contract. For example, you may be able to pay the broker a fee for supplying signage or placing ads on your behalf or to schedule home showing appointments. This setup allows you to pick and choose service offerings to build the support you need instead of signing up to share your commission for services you may not always want or need.
When it comes down to it, 100% commission real estate poses undeniable advantages for agents, especially those looking to break away from tradition and blaze their own trail as a business owner. It is well worth getting to know a bit more about the 100 percent commission industry model to determine if making the change could be a good career move on your part.