100% Commission Brokerage Vs. Traditional Brokerage

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Brad MillerPro Member

Real Estate Agent · Duluth, GA · Member since 2016 · 63 posts · 45 votes

5y

Just understand, you get what you pay for. There is no brokerage that will give you 100% commission, like Nathan said, you will be nickel and dimmed to death. Most will charge for every piece of paper you print, every sign you need, etc.

Usually you can have good or cheap, pick one. I interviewed 8 brokerages from self managed to full support, there were many reasons I went with a full support brokerage.

To each their own though. It's not always about the money. You need to know there will be support when (not if) there are issues and questions, someone to help with marketing material and if you are going to be a "quantity agent" then $20 for each sign, or a charge for each lockbox is going to have a huge impact on your take home.

Something to keep in mind is you are getting into an industry that could have legal and criminal repercussions if something is not done correctly. Make sure you have an office with a broker willing and able to help you at all times. Not just when it's their time to "work the desk" or return calls in 24hours. Also, if you are with a 100% broker make SURE they provide E&O insurance. If not then that is an additional expense you will have to pay for.

2 Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

5y

EXAMPLE: Brokerage A offers 100% commissions but charges $500 monthly administrative fee and $150 per transaction. Brokerage B charges no administrative fees or desk fees but keeps 40% of all commissions earned.

You sell six houses for a total of $1 million your first year and earn a 2% commission ($20,000)

Brokerage A: Pay $6,000 in administrative fees, $900 in transaction fees. This leaves you with a net income is $13,100

Brokerage B: Pay $0 fees but pay 40% of your commission to the Broker ($8,000) leaving you a net income of $12,000.

If you earn an average of 3% commission on those sales, you would net $23,100 under Brokerage A and $18,000 under Brokerage B.

But what if Brokerage A has other fees? From what I've seen, they charge you for desk space, conference room, phone, copier, marketing materials, etc. A traditional Brokerage may include a lot of those start-up expenses. Traditional Brokerages often have graduated commission splits, meaning you keep more of your money based on how well you perform.

In my office, a new agent starts at a 60/40 split but I provide equipment, phone, business cards, signage, an office manager, and more. If they are an Associate Broker, they start at 70/30. The more commission they earn, the better the split. Once my office has earned $15,000 for an agent, they switch to 100% commission. It doesn't benefit an agent with just a few sales but an agent on fire can make a killing. I believe my wife had ten sales before reaching 100% commission and then she had ten more sales after that.

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6 Reply

Joe HomsBusiness Member

Flipper · Mission Viejo, CA · Member since 2014 · 2k+ posts · 1k+ votes

5y

@Timothy Lewis if you are comfortable with your experience level then go for that near 100% commission brokerage. If you are flipping homes like me then every dollar counts towards the bottom line. I would reach out to my close friend in your are @Violet Rose who is an experienced investor herself and works for a 100% brokerage. She would be able to guide you best.

Good Investing...

Bruce Lynn

Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes

5y

I just was talking with my wife about this....people get into real estate wanting to be millionaires....but then try to do it on the cheap. Think of the mindset of the people around you. Can they contribute to your success. Go show me the top 10 agents at the 100% office....what are they making and how are they doing it. Then go show me the top 10 agents at almost any traditional brokerage. See who's making it. Just something to think about. It's always good to watch expenses, but I think most agents don't make it in a big way, by thinking small. Are you rubbing brains with the cream of the crop or the bottom of the barrel? Only you can answer that.

One thing you might do is for example ask who you call if you need assistance with a complicated contract....or like the other agent is threatening to sue you. Then go test that. See who answers, if they don't answer, see who calls you back, see how long that takes. Do that before you join them.

A couple of questions I would ask too is who reviews your contracts? How does compliance work? How fast does that happen? If they're not doing it, then they're shifting big risk to you perhaps.

Also how do you get paid? Do they cut CDAs to the title company and you get paid by title at closing, or does title company pay the brokerage and then you get a check from the brokerage? I notice a lot of smaller brokerages pay the agents. I personally would not want that. It can takes weeks depending on the accountant, signatures, and financial status of the brokerage. What happens if the budget brokerages goes out of business and they're holding on to your commission checks. Now you're a creditor. I personally like getting paid by title at closing. I don't want any broker big or small holding my money.

What if there is a brokerage that pays you? You can potentially make more profit sharing with a company like Keller Williams that you would ever pay in split?

5 Reply

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

Thank you @Nathan Gesner for that perspective. I did not know about commission cap. That actually changes up my whole mind set. I can reap the benefits of training and utilizing resources offered by a traditional brokerage while at the same time, working my way to eventually collect 100% once I do enough business. I have to do some research and see if that is available in Miami. Thanks again!

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

Making note about E & O Insurance. Thanks @Brad Miller

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

Thank you @Joe Homs I am going to reach out to her

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

These were the exact issues floating around in my head, which prompted me to create this post @Bruce Lynn . In a perfect world, I wanted someone to tell me that there is brokerage that helps with contracts, in house title companies, marketing, and a broker one phone call away that could help me at all times....but I'm starting to realize that's not going to happen. lol.

I appreciate the insight. Extremely helpful!

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

5y

Originally posted by @Bruce Lynn:

I just was talking with my wife about this....people get into real estate wanting to be millionaires....but then try to do it on the cheap. Think of the mindset of the people around you. Can they contribute to your success. Go show me the top 10 agents at the 100% office....what are they making and how are they doing it. Then go show me the top 10 agents at almost any traditional brokerage. See who's making it. Just something to think about. It's always good to watch expenses, but I think most agents don't make it in a big way, by thinking small. Are you rubbing brains with the cream of the crop or the bottom of the barrel? Only you can answer that.

One thing you might do is for example ask who you call if you need assistance with a complicated contract....or like the other agent is threatening to sue you. Then go test that. See who answers, if they don't answer, see who calls you back, see how long that takes. Do that before you join them.

A couple of questions I would ask too is who reviews your contracts? How does compliance work? How fast does that happen? If they're not doing it, then they're shifting big risk to you perhaps.

Also how do you get paid? Do they cut CDAs to the title company and you get paid by title at closing, or does title company pay the brokerage and then you get a check from the brokerage? I notice a lot of smaller brokerages pay the agents. I personally would not want that. It can takes weeks depending on the accountant, signatures, and financial status of the brokerage. What happens if the budget brokerages goes out of business and they're holding on to your commission checks. Now you're a creditor. I personally like getting paid by title at closing. I don't want any broker big or small holding my money.

What if there is a brokerage that pays you? You can potentially make more profit sharing with a company like Keller Williams that you would ever pay in split?

All commissions belong to the Broker and the Broker pays the Agent their split. To my knowledge, that's how it works in every state. How are you receiving payments directly from Title without it going through your Broker?

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

5y

I'm licensed, and work for a 100% commission broker. I pay $25 per month and $295 per transaction. On a typical deal, I'm at $12,000 before any fees. I also pay a Transaction Coordinator for every transaction, which I don't count because I don't HAVE to pay it, I choose to.

I could be licensed on my own and truly take home 100% of that commission, but I like the opportunity to ask questions of my managing broker. I've had some weird deals happen lately, and it is super helpful to have someone else to bounce ideas off of.

However helpful it is, it isn't worth 40% of my commissions.

7 Reply

Sherry McQuageBusiness Member

Real Estate Broker · Moore County, NC · Member since 2020 · 169 posts · 141 votes

5y

@Bruce Lynn

Hello,

I have been with Keller Williams for 2.5 years. I have been inactive before that for 17 years.

When I activated my license, I chose KW because two agents I had dealing with were KW and were dang great.

You will have to decide what your finances will allow....my first year was 1-2 deals....I have younger kids, spouse, etc, and spent my first year and a half attending classes at the market center (kw office). My monthly fees were around $113. The fees cover E&I insurance, use of the copiers, and I could reserve a conference room as needed. The classes I attended (usually no separate charge), being able to hang out with experienced agents, just absorbing the good energy at the market center, and being able to ask (or call, text, or email) ANY agent there was beyond valuable.

Stefanie Jensen

Real Estate Agent · Ogden, UT · Member since 2017 · 57 posts · 165 votes

5y

@Timothy Lewis

I live in Utah and I hit the jackpot with my independent broker. He offers terrific technology, and he literally answers his phone or returns a text within minutes… Every time. He charges a flat fee of $495 per transaction and it’s been amazing. You find out really quickly that real estate is a learn as you go type of job. I have literally never met my broker and I have never walked into the office, not even once. We have a great relationship because he responds to any and every question I’ve ever had. If you go with an expensive brokerage, it doesn’t always guarantee that your broker will respond when you have a question. My broker is prompt, not greedy. I keep the majority of my commissions because I did the work to earn them. With the Internet, you don’t need an office the way you did in the old days. Everything is done online. If you need cheerleaders and company, go sit in a real estate office all day. If you want to earn and keep your money, do your work from the Internet at home.

Patrick J.

Rental Property Investor · Tucson, AZ · Member since 2019 · 173 posts · 87 votes

5y

@Nathan G.

Not true, Fees are based on transactions so the more transactions at higher price points, the more fees the brokerage collects. It is $200 every $200,000 for my brokerage. If the sale is $200,001, then it bumps up to $400 until $400,000.

Patrick J.

Rental Property Investor · Tucson, AZ · Member since 2019 · 173 posts · 87 votes

5y

@Nathan G.

Lol $500/month?? Its $25/month and $500 per year for E&O. There are no other fees other than $200-$400 transaction fees. Homesmart and Realty One Group have a similar structure along with MyHomeGroup. Never heard of a monthly fee of $500.

No amount of support will make an agent succeed. 70/30 brokerages have the same failure rates as 90/10 or 95/5 brokerages which is basically ours after deducting monthly fees and transaction costs. Success isn't dependent on the brokergae unless the brokerage is feeding you leads they don't want. There are small mom and pop brokerages that get a lot of buyer leads that they just pass on to other agents and only deal with listings.

Bruce Lynn

Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes

5y

@Nathan Gesner Broker prepares a CDA or commission disbursement authorization and sends it to the title company. Title company follows their instructions. That's the standard of practice for bigger brokers in Texas. Smaller brokers have that option too, but I suspect from what I hear from some agents is they use that money for cash flow. The accountants, office managers, or the broker themselves sometimes tell the agents we can't pay you until next week. That would make me nervous as an agent. If title pays brokerage the full commission and brokerage distributes, my fear would be broker collects X on the last day of the month, files bankruptcy on 1st day of the next month, and then I become a creditor of someone who has no money.

My broker shares financials each month, so while we wouldn't be a creditor, we know where the brokerage stands financially. We're an open book company.

David M.

Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes

5y

@Timothy Lewis

Yes, there is a balance to be had between the two. It depends on what you really need and what you really want..

All that being said, what is your goal with the license? I see from your profile you are a full time pharmacist. Apparently, a group of you are doing investments and/or wholesaling. How many deals do you do that you'd expect to use the license? Are you going to be representing anybody else, or just your own deals? There are some brokerages that provide favorable terms for your own deals. If you are really doing lots of the deals, many traditional and non-traditional brokerages alike will switch to 100% commission after the brokerage has earned so much off of you.

As its been basically said above, being a real estate agent is a profession, specifically in sales. If you have no need for the sales portion, then a significant number of aspects of the brokerage really then don't matter to you. That's fine. There are other licensed investors who don't take on clients.

Just be mindful of all the fees. I've just realized that some market themselves regarding just their "own" fees. However, you still have other fees such as the E&O premium (which varies by brokerage -- at least in my area), your local Realtor dues, MLS fees (how many MLS' do you need to sign up with? -- there are 12 in NJ alone), electronic keys, etc. Sure, many of these will be the same no matter which brokerage you sign up with since you will be still operating in the same area. Just something to look for....

Honestly, I didn't think KW was a traditional brokerage... Isn't it a newer, progressive brand really growing in the past couple of decades? Whatever...

Even if you are going to use the license for yourself, you might want to have a brokerage with "somebody to talk to." Being licensed now, there are actually "rules" to follow. Unless you had a great pre-licensing course and remembered every little bit they taught you, I think there is still more to learn the profession, even for yourself. I don't think one can really be their own judge of their capability.

Some brokerages are more "automated" or digital than others. Do you need to pay for your own DocuSign/Dotloop accounts? What about a CMA tool? Does the brokerage still cut paper checks to you -- do you care (because I honestly, don't)? I don't know your brokerage market in FL, but just throwing some things out there to ask about as you interview for brokers.

Just my two cents.. I hope that helps. Good luck.

Carlos RoviraBusiness Member

Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes

5y

@Timothy Lewis I run a small brokerage firm in Miami. I’ve recently shied away from 100% commission arrangements because I find that it is never worth my time, especially with newer agents that require more guidance. I do offer more competitive commission splits than most of the larger firms because I honestly cannot compete with all the perks they offer. One of my close friends runs a Keller Williams office down here in Miami. They do offer caps on commission splits and it is incredible the amount of perks they offer their agents. Happy to make an intro if you’re interested. I definitely think it’s a good investment to join one of the larger firms your first time around.

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

It is always good to have someone in your corner @Mindy Jensen I'm sure I can find a broker that will offer a good level of help and advice. After all, even though he/she will be making significantly less money off of each of my deals....I'm still making them money. Thanks for your help!

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

You 2 cents were greatly appreciated @David M. I really like the hybrid model of starting out with a split commission and eventually moving to a 100% commission relationship. Initially, I only intended to use my license for my own RE ventures but eventually by goal is to represent other investors so it would def be advantageous for me to have the proper resources that will allow me to preform my job at a high level.

Thanks again for your help!

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

Sure @Carlos Rovira I'll send you a PM

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

5y

You can also ask the question the other way around: which brokerage delivers the most value for my split? The question where do I pay the least assumes that you get the same (no) value from the brokerage.

I attribute a lot of my success to my brokerage, early on the training, now the technology. I am in the top 1% of agents by unit count in the Milwaukee metro area (1.6 million people) and I cap after about 6 weeks, the rest of the year is 100% commission. What I pay in splits before I cap is well worth it to me, because I look at an ROI. If I would be brokering only my own transactions as an investor I would go with flat fee broker, that's good enough to meet the legal requirements.

The brokerage is a vehicle, choose the right one for the task. Do you need a truck or a sports car - one is not better than another, but they are better at different things.

Judy BestPro Member

Investor · Little Rock, AR · Member since 2017 · 81 posts · 62 votes

5y

You definitely need to ask each broker you are considering about wholesaling, subject-to, and any other deals you may bring to the table. Some will allow it, others will not. The brokerage I am currently with does not allow Realtors to wholesale deals, but they were a match for me in every other deal. I do almost no wholesale deals.

OP

Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes

5y

All great points @Marcus Auerbach and @Judy Best Thanks!