An Ownership Philosophy on Agent Compensation

Transcript:

If you’re not independent, how does a broker-split to franchise fit into the agent’s split?

This is a great question, and when I was an agent with RE/MAX I paid $750 per month as a desk fee and $439 for each of my agents. Then the split was 95-5, so the broker would take 5% and our team would keep 95%. Then, on top of that I did a 5% team admin fee. So, it was actually 10% off the top, and then we did 30/40/50/60 splits.

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For my agents, at the time, if they sold $400,000 in the month prior, I would cover their broker fee for that month. I want a team where there are no out-of-pocket expenses for agents. All their expenses are baked into the splits, and if they’re productive it won’t matter. My conversations around buyer agent splits revolve around how much money they’ve earned in the world around the free market for services.

If I’m talking to a recruit, I ask them this and how many homes they’ve sold as well as how much they made. I actually switched to the KW model of resume reviews for highs and lows in compensation. So, for everyone that joins my team now I know exactly what they did in their positions and what they made doing it. 

When we went from RE/MAX we kept the 5% and 5%, so it was still 10% off the top, but we gave 1% to RE/MAX. My former broker was keeping four and giving one, and now I was keeping nine and giving one. When we went independent, I kept the 10% as a broker/admin fee. We still do the 10% off the top, so on the buyer side it’s 30/40/50/60, which ends up being 27/36/45/54 and listing splits are 22.5% and 31.5%. The model is the whole 45/25 payout on the buy side and sell side. This averages out on 35 if you have a balanced 50/50 business, which you need to have for a healthy real estate team.

If your agents are producing you should step up and be willing to cover some of the broker fees. However, if you’re paying too much money to the broker at the end of the day, you have to consider other options. One guy told me he was paying $23,000 to KW, and that each of his eight agents were paying $8,000. That’s a total of $87,000, which is too much in my opinion. I like KW, but I’d argue that their compensation model isn’t being put to good use. 

Everyone needs to figure this out, but I’d always base it off of your agents' production.