You can increase your real estate profits with every transaction. However, how do 100% commission brokers make money?
A question new real estate agents often ask is, “What is the 100% commission brokerage model?”
You may not understand some of the words or phrases used in this business model, so many of them have been highlighted so that you can click on them to read their definitions.
Agents typically receive a percentage commission from brokerages, with most of the commissions going to the brokerage. According to the national average, the broker (office) and agent split the commissions evenly (50/50).
Another option exists, however.
In the last decade, 100 commission real estate broker models have become very popular.
In this model, the agent receives 100% of the commission. How is that possible?
Big Block Realty does not have any.
Upon joining Big Block Realty, you pay either a $300 monthly fee, or a $3,000 annual fee. Agents receive 100% free training, access to open work areas in one of four office locations, and 100% support in return.
Additionally, we offer a referral program that entitles you to receive a new Mercedes-Benz when you refer five new agents to Big Block Realty: you refer five new agents and your monthly/annual fee is waived when they join).
It is not the same for every 100% commission model.
Other 100% commission brokerages, for instance, may charge their agents $1,000 or even more a month for their desk space and amenities, without any training or support, and without any referral program.
What makes 100% commissions different from traditional commissions?
Let’s compare a 50% commission with a 100% commission since the national average is 50/50.
Consider a commission of $20,000 for the total sales. Brokers receive $10k and agents receive $10k if a 50/50 split is used. An agent, however, receives the entire $20,000 commission under a 100% commission model.
According to the hypothesis, the agent pays $12,000 for the office fees each year, which results in $8,000 in profits for the agent. A 100% commission agent with a high income earns more commissions over the course of a year.
A 100% commission model can take a variety of forms
Support services and office amenities aren’t provided by all real estate companies. Nevertheless, they give their 100% commission agents discounts by reducing their monthly fees or charging a flat “per transaction” fee. An agent who does not have a desk or office privileges, for example, could be charged $100 per month.
For each sale resulting in a commission, a flat fee (like $750) is charged in place of a monthly fee.
In the above example, the 100% commission agent makes a profit of $18,800 by paying a small monthly fee ($1,200 annually) to the 100% commission agent. Alternatively, the $750 flat fee can be paid to the broker, resulting in $19,250 for the agent.
Summary
Successful real estate agents have become accustomed to 100% commission brokers.
Until they earn a steady flow of commissions, new agents may benefit from traditional commission structures. Hence, the 100% commission model makes sense since after paying a broker’s annual fees (or per transaction fees) the agent can earn more commissions, therefore bringing in more income.