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Sales commissions are still the norm in real estate, but the industry is also in the midst of rapid evolution when it comes to agent pay
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There are a lot of careers out there, but people go into real estate to get paid.
Of course, real estate is filled with opportunities to impact lives. Agents spend their days helping people find their first home, their dream home, or their forever home. The act of connecting people with their shelter speaks to fundamental human needs. It’s part of the draw.
But real estate is also unique because it’s one of only a few potentially high-paying careers in which industry members have significant control over their income.
To better understand how the agent compensation landscape works today, Inman reached out to a group of industry professionals across the U.S. and Canada. From those conversations and Inman’s own research, it’s clear that sales commissions are still the dominant way for agents to earn a living. However, it’s also apparent that the pay landscape has rapidly evolved in recent years, and continues to do so today. It’s a unique moment, with downward pressure on commissions while models such as stock options explode in popularity.
Agent pay is a massive topic, but here are the main ideas every industry professional should know about:
The evolution of the commission model
The commission model has been standard practice in real estate for generations. But Russ Cofano — chief executive officer for Collabra Technology and former president of eXp Realty — told Inman that in the 1970s, splits tended to be in the neighborhood of 50/50 between agents and brokerages. At the time, he said, the “general philosophy was that the brokerage company owned the business and client relationships, and the agent was sort of secondary in that.”
But that began to change when RE/MAX came along.
“The RE/MAX concept was, ‘Hey we need to make money to help support your biz, but it’s your business,'” Cofano said. “So they said, ‘Rent a desk from us. We’ll provide all the things that will enable you to be in business, but you’re an independent contractor so go to town.’ That really started to put ownership in the hands of the agent.”
Nick Bailey, RE/MAX’s current chief customer officer, told Inman these changes got rolling nearly 48 years ago when company founders Dave and Gail Liniger began looking at the brokerage landscape and thought “there has to be a better way for the real estate agent.”
“It really did change the landscape for real estate agents,” he added.
Over the decades, RE/MAX’s system evolved, but those early moves were key in driving an industry-wide trend toward more commission going to agents. That trend further accelerated, according to Cofano, over the ensuing decades when Keller Williams came on the scene and began doing commission splits with caps on how much an agent would pay to the company.
Ultimately, there was a philosophical shift in which the agent was seen as controlling the business.
“And whoever controls the business is going to get the lion’s share of the commissions,” Cofano concluded.
Commission models today
Comprehensive hard data is scarce when it comes to how pervasive different models are right now. However, Inman’s 2022 agent appreciation survey, which elicited nearly 400 responses, indicated that the vast majority of industry professionals continue to earn compensation via commission splits.
But there are almost as many flavors of split as there are real estate companies.
At RE/MAX, for example, Bailey said the company recommends brokers use a split that gives 95 percent of the commission to the agent, with the other 5 percent going to the brokerage. That said, RE/MAX is a franchisor and individual operators across the world are free to customize their own commission programs.
At eXp Realty, every agent starts off with a split that gives them 80 percent of their commission, with the other 20 percent going to the company, according to CEO Jason Gesing. However, Gesing also told Inman that eXp caps what the company can collect at $16,000 per year, meaning that once an agent hits that limit he or she collects 100 percent of the commission.
Another popular way to handle commissions is with a tiered system.
Ryan Rodenbeck, owner of Spyglass Realty in Austin, Texas, told Inman he uses “a graduated split model.” In his case, that means agents doing up to $3 million in volume have a 75/25 split, with the larger share in the agents’ favor.
However, when volume rises to between $3 million and $4 million, the agents’ split goes to 80 percent, and above $5 million it’s 90 percent. Rodenbeck said the graduated model works well for his company, which “operates like a team.” It also means that the brokerage itself really has to work hard to earn its share of the money and offer valuable services to its agents.
“You cannot treat a $20 million producer the same as a $3 million producer,” Rodenbeck added.
Tiffany McQuaid, president of McQuaid & Company, which has about 30 agents in the region around Naples, Florida, similarly uses a tiered system. McQuaid didn’t say what the specific splits at her company are but explained that there’s a three-tier system that increases an agent’s split of the commission as volume rises. This approach allows agents to earn more as they do more deals but still enables the company to provide an array of services.
“There is a lot that is included within their scope of being a Realtor here,” McQuaid explained. “Brochures, flyers, copies, things of that sort are all included.”
Cofano said that it’s rare to see a basic split today that gives an agent anything less than 60 percent.
However, that doesn’t mean most agents are actually taking home huge chunks of their commissions. Instead, the rise of teams means that many agents are now sharing their split with their team leader as well. So for example, an agent may be at a company with an 80/20 split in their favor, but if they’re also on a team they may be sharing half of that 80 percent with the leader.
“There are a lot of team members who are making 40, 50 percent splits,” Cofano said. “Which is what was happening in the olden days before RE/MAX.”
Whatever splits agents are getting, Inman’s recent survey indicated widespread satisfaction among agents with their compensation. One survey respondent, Heather Scott of Forest Hill Real Estate in Ontario, Canada, told Inman that while she’d, of course, love to take home 100 percent of her commissions, she’s happy to do a split because she knows the money is going to things she uses, like an office.
Inman’s survey further showed that nearly two-thirds of respondents keep more than 70 percent of their commissions. Another fifth work with 70/30 splits. On the other hand, only 3 percent of respondents have 50/50 splits.
When it comes to choosing a model, the experts who spoke with Inman recommended looking not just at the split itself, but also what it buys.
“There’s the compensation and then there’s the value you’re getting from your brokerage,” Gesing said. “Look for opportunities where long-term you’re setting yourself up for success.”
Non-commission income models
While commission splits are the most common form of agent compensation, there are other models too.
One of the highest-profile of those models is stock. Perhaps most famously, eXp offers stocks to agents as they hit various milestones. Gesing explained, for example, that agents get $200 in company stock for signing up. They get other stock awards for hitting their commission cap and bringing on other agents, among other things. Agents at eXp can also choose to take some of their commission in the form of stock.
For some agents who have been with eXp for several years, this program has been a major source of income. At the beginning of 2019, shares in eXp were trading for less than $4. But by mid-2020, prices began skyrocketing and ultimately peaked in February 2021 at nearly $78 per share. As of December 2021, the share price had settled back down into the mid $30 range, but that’s still a huge increase in value compared to just two years prior.
Compass — which went public in 2021 — has also made its stock program a major part of its pitch to agents.
Additionally, companies such as Keller Williams and eXp ha