As a broker/owner, you can choose to split commissions with your agents in any number of ways. But each option for commission splits will attract different types of agents. You want to be sure that your commission split is attracting the kind of people you want to be a part of your team while you build long-term success.
Ask your team which matters more — the commission split or the amount of money you take home to your family? Often, agents will be less concerned about the percentage and more concerned with the actual amount of money they’re keeping.
People will give you all sorts of advice about how to divide commission with your agents, but to attract agents who are hungry, humble, and smart, you want to make sure you’re choosing the best compensation models. You might wonder what a typical commission split is for real estate agents, but the better question is, what is the commission split that will attract the best agents.
Attracting Buyer’s Agents
For the first two deals in a month, your buyer’s agent should be compensated with 40 percent of commission. For deals, 3-4 (in a month) the agent should keep 45 percent. The buyer’s agent should receive 50 percent commission for any deals beyond that during a month.
This commission structure incentivizes agents to close more deals in a month by increasing the commission as the number of deals goes up. It also allows you to provide the support agents need. You can afford to help with admin, marketing, support platforms, and other things that your agents need to succeed and ultimately close more deals, helping them bring home more money.
Commission Splits for Listing Agents
Listing agents should be compensated with 25 percent commission on closed sales. To incentivize closing more transactions, closed transactions of 10 or more in one year should be compensated with a commission of 30 percent. At the end of the year, it reverts back to 25 percent.
Listing agents can move more quickly than buyers agents. With the support of a strong brokerage, they’ll be able to close a large amount of deals in a year. The percentage they take home is unimportant because they’ll be able to close so many deals, taking home more money.
Who You’ll Attract
There are some brokerages that offer agents 100 percent commission, while just charging a desk fee. While there’s nothing wrong with that type of split, it’s going to attract the one-man-show type of agents — the ones who like to work solo.
If you’re trying to build a cohesive team, you’re better off without the solopreneur types. These people are self-motivated and driven but don’t value open communication, compromise, and other aspects of teamwork. A more even split will attract the type of agents who want their whole team to succeed, and they’re willing to do what it takes to create value, not just for themselves, but for everyone.
After you attract agents who are interested in working as a team, it’s important to understand the ways they work together. The types of agents who are looking to be a part of strong teams will likely be dissatisfied if the team doesn’t get along or doesn’t work efficiently together.
To ensure you’re retaining your team-oriented agents, you can use a behavioral analysis tool like DISC, to understand how to communicate most effectively with each other. This will help you keep the agents who were originally drawn to you because of your commission split.
Hard Working Agents
The best agents know they can reach their income goals regardless of the commission split. They’re hard working and have no worries about closing enough deals to stay comfortable. This is the level of confidence that you want on your team. Not only are these agents high-performing, but they tend to motivate their teammates with their positive attitude. When you fill your whole team with this type of agent, the team becomes unstoppable.
Often, agents with this level of confidence bring a reliable client base with them. They likely receive regular referrals from these clients, as well. Bringing an agent to your brokerage who brings leads with them is invaluable.
If you have agents who know they can close a lot of deals when given support, they will be drawn to a brokerage that offers educational opportunities and resources, like the Top 50 system. The Top 50 system teaches agents how to receive multiple referrals every year without fail.
When you offer a split with agents, you’ll have the resources to seek out top-quality systems and implement them. Agents who are still trying to build their client base and referral system will want to join a brokerage that offers these resources.
Knowledgeable agents understand that you get what you pay for. There are many discount options available when it comes to real estate agents, but to get the highest quality service, buyers and sellers should work with top-tier agents.
The principle works the same with brokerages. While there are some brokerages that offer agents higher splits, the agents get what they pay for. Those brokerages are unlikely to offer the type of support that a top-tier agent needs to succeed.
Agents who understand the industry know the difference it makes to have great support staff, excellent marketing, and ongoing training. Brokerages can provide these things when they’re not strapped for cash.
Knowledgeable agents are also aware of how much they learn from having the best of the best teammates to work with. When you’re working with true experts, they can help you find high quality clients and teach you strategies and skills in the business. Even seasoned agents can learn things from other seasoned agents. A team that includes top-notch agents, management, and a great training program is more valuable than any split.
Joining a team with high-quality resources is insurance against times when the market shifts or business becomes more difficult. A top-quality team works together to shift toward whatever the new market requires.
During the COVID-19 pandemic, agents with strong teams were able to adjust to the new environment more rapidly and effectively than agents who were part of teams that didn’t offer any support. Some brokerages did research into the best way to provide services virtually, while others implemented new online marketing strategies to reach new clients during the periods of quarantine.
Incentivize a Supportive Dynamic
Some agents see a brokerage advertising a high commission split and get excited, but what they don’t realize is that those commission splits disincentivize the brokerage to send the best clients to their agents. When a broker/owner is feeling stressed about the budget, they’ll want to keep their best clients, rather than sending them to a newer agent.
While every team leader might start with the best intentions, in moments when you’re low on cash, it’s difficult to send the most lucrative deals to agents. When you split commission half and half, you’ll be able to send those clients to agents and support them on their path toward success.
When you create a supportive environment, the right agents will seek you out. Every high quality agent knows how far a supportive environment will take them. A more even split is the way to create that supportive, team-driven environment.
Commission splits might seem like a small piece of the puzzle, but choosing the right split could be the thing that makes or breaks the business. For additional help analyzing the structure of your business, click to learn about an effective and affordable solution or schedule a free consultation with a Workman Success Systems business analyst.