It’s hard to believe – and even harder to swallow if you’re doing it – but most real estate agents actually fork over about half of their commissions to their broker! A new trend in real estate sales presents an exciting way around this HUGE PAYCHECK DEDUCTION. I’ll tell you exactly how to land this innovative new way of getting paid in full for your work in just a minute, but first I want to mention another way to get PAID IN FULL. It has to do with a certain popular word that nearly every real estate professional throws into their listings every single time it is remotely appropriate. This word has to do with being environmentally friendly and, I’ll give you another hint: it’s a color. And turns out, it’s now officially cliché. Buyers actually reported that they are LESS LIKELY to respond to the word “green” than another adjective that, let’s be honest, means the exact same thing! Find out what this word is by checking out our report on this topic in the REI Today News and Networking Section at www.REI.Today.
Now, back to putting about twice as much money in your bank account each time you close a deal as you were before. Here’s, well, the deal:
Most real estate agents who work with a broker pay a percentage of every commission they earn to that broker. In some cases, it’s about half, and in nearly every case it’s at least a third, and that’s true whether you are a certified realtor or a licensed real estate agent who has not registered with the NAR. Now, this isn’t some extortion scheme, regardless of how some of these agents clearly feel, in a good broker-agent relationship the broker provides that agent with office space, marketing support, brand recognition, some degree of legal protection, possibly workplace assistance, continuing education, and a decent flow of new leads. So in a good relationship, the agent is essentially paying for a number of broker-related services.
However, as we all know, real estate is a highly flexible, highly variable industry. A lot of agents work entirely online, don’t use office space even when it’s available, and may be able to handle their own marketing costs in their entirety for less than they pay their broker. In situations like these, agents may, not surprisingly, chafe at forking over such a large chunk of their commission, and a new type of “brokerage” service is attracting these independent spirits in droves.
The new brokers allow agents to keep 100 percent of their commissions and simply pay a relatively low monthly fee – often less than $100 – in exchange for basic transactional assistance, extremely minimal legal protection, and a bit of insurance. These 100-percent companies, as they are called, are recruiting agents right and left all over the country, and many agents believe they are better served by the bare-bones brokerages than they were by their former brokers.
Of course, in a broker-agent relationship it’s not all or nothing. A number of more traditional brokers are offering “cut down” packages to their agents that cost more than 75 bucks per transaction but far less than half the commission. Some brokerages are even offering agents the 100-percent company option because, as they report, agents then have a chance to basically see what they’re missing and make an educated decision about what type of relationship they want with their broker rather than simply jumping ship. In hot real estate markets like Florida, there are hundreds of these 100-percent companies, and more 100-percent startups are springing up all the time.
Every real estate professional is different and, for many investors, the hassle of maintaining a real estate license and dealing with brokers ends up being more trouble than it’s worth. However, whether you are an agent or just work with them, being aware of this type of opportunity is invaluable because an agent who is working secure in the knowledge that he or she will be collecting 100 percent of their commission may be more willing to negotiate that amount. On the other hand, that agent may not have the resources to market your property as you wish. There are multiple factors to consider when deciding what type of agent you wish to be or wish to work with.
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REI Nation, thanks for listening in and always remember this:
Your best investment is your own education.
Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.