The Truth about 100% Commission Real Estate Brokerages
Typically, real estate brokerages pay their agents a percentage of the total commissions from a deal, with the remainder of the commission going to the establishment.
Nevertheless, the 100% commission model has begun to gain more popularity because of the shift to online business models.
If you are an agent – especially a newly certified agent – and you are trying to decide if 100% commission real estate brokerage is the way to go, or if you are simply curious about what it is, then keep reading because we’re breaking down the 100% commission brokerage.
What is a 100% Commission Real Estate Brokerage?
A 100% commission real estate brokerage is a brokerage that pays its agents 100% or the entire commission from a successful deal. This implies that agents at such brokerages do not have to worry about splitting their commission with the brokerage.
Generally, in the traditional brokerage model, the commission from every deal is split between the agent and the brokerage, such as 50-50, 70-30, etc. Using 70-30, if a deal produces $100,000 as commission, the agent takes $70,000 while the brokerage keeps $30,000.
However, working with a 100% commission brokerage, the agent keeps the entire commission and is only required to pay a specific amount – which varies depending on the brokerage – as a flat fee for every transaction, no matter the amount of commission.
If we use the example above, the agent keeps the entire $100,000 while paying as little as $400 as the stipulated amount.
The 100% commission brokerage is an ideal design for agents, especially the experienced ones who want to work alone and earn more money than they typically would at a traditional model or build a brand name for themselves without worrying about the influence of the brokerage.
Candidates who are best suited for this brokerage model are agents who are skilled, experienced, and do not need in-office training. Most of the time, they have built an impressive clientele and a successful business for themselves over the years.
The Truth about 100% Commission Brokerage
So, is it too good to be true? Well, let’s explore how 100% commission real estate brokerages actually work and whether or not you should work at one.
You Still Have to Pay the Brokerage
Like every other business, real estate brokerages aim to make profits while delivering the desired results to their clients. Hence, the brokerage would not just give their agents 100% commission without finding ways to make money themselves.
As an agent, you are still required to pay specific fees to be part of the brokerage, although these fees are usually fewer than traditional brokerages.
Depending on the brokerage, these fees vary as no real estate brokerage has the same fee structure. Some of these fees include a flat transactional fee for every closed deal, monthly desk fee, yearly fee, compliance fees, technology fees, administrative fees, etc., and they usually go to the general maintenance and sustainability of the brokerage.
When joining a 100% commission brokerage, it is essential to look out for hidden fees and other alternate avenues that these brokerages might use to make more money. Ensure that the brokerage is transparent with their costs and you are familiar with these costs before signing up to be their agent.
Insurance is Typically Paid Upfront
Transactions in real estate almost always involve huge sums of money, and if anything goes wrong, the consequences can be dire. Hence, agents need insurance to protect them from the financial aftermath of various errors and liabilities.
One such insurance agents need to acquire is Errors and Omissions (EO) insurance which covers liabilities and fees associated with lawsuits that arise due to:
- Errors in property listings
- Accusations of negligence
- Professional mistakes
- Failure to deliver promised services.
Unlike traditional brokerages, where agents make monthly payments, with full commission brokerages, these insurances are usually paid upfront.
This implies that you’d have to part with a large sum right from the start, which could be pretty challenging. Other insurances include general liability insurance, cyber liability insurance, etc.
Communication is all Virtual
Typically when joining a more traditional brokerage as a new agent or when you need assistance from more skilled personnel on closing your deal, you would meet with your superiors at the office. However, this is not the case with 100% commission brokerages.
As most of these establishments operate remotely, which means that all forms of communication are virtual. This includes onboarding and signing new agents, important deals, meetings, and reviews.
Each brokerage has its custom mode of operation. However, generally, to join, you need to send an email indicating interest in joining the brokerage with your credentials attached.
If you are selected by the brokerage, a response will be sent with the necessary paperwork for you to fill out. This has gone a long way to provide agents with considerable flexibility and independence without having to rely on typical office infrastructures and support.
However, it could also make it quite tricky for new agents who need guidance to request assistance with a deal.
No Brick and Mortar Office or Limited Space
Most 100% commission brokerages typically do not have offices, or even if they do, they have small, limited office spaces should the need arise for face-to-face meetings.
This enables them to charge their agents very low monthly fees and keep office expenses, such as building maintenance, at a minimum.
Traditional brokerages require office spaces to create a professional setting when meeting and discussing with clients. This has been known to reassure clients of the brokerage’s legitimacy, thus giving them an advantage when closing deals. It is also necessary to maintain a working and corporate environment for agents and hold in-company meetings.
Lack of Brokerage Support
Agents at 100% commission brokerages do not have access to the same level of support and resources offered at conventional brokerages and often go into the market alone with no support or training. This is majorly due to the lack of office space.
Generally, when new agents are starting out at brick-and-mortar brokerages, they are offered business support, marketing tools and extensive training courses, usually at the offices. They also have access to a vast network of professionals to work directly with and obtain hands-on knowledge.
However, this is not obtainable with a 100% commission brokerage, and even if this training is provided, it is not as extensive as those provided by traditional brokerages.
This lack of training and support may pose a challenge, especially to inexperienced agents who are just starting out in real estate and require coaching.
Final Thoughts 100% Real Estate Commission Real Estate Brokerages
100% commission brokerages are great opportunities for real estate agents to make more money and build a brand for themselves.
However, it is advisable for newly licensed agents to develop experience in more traditional models of brokerage, as 100% commission brokerages do not provide the necessary support and coaching they might need to develop and advance in the real estate world.
TL;DR: 100% commission real estate brokerages are great for experienced agents who don't need much support. But, because they are hands off, they might be a hard experience for new agents. Also, don't forget, you still have to pay for monthly fees.