Commission splits

Real Estate Agent
17yFollow

Commission splits

Mark Yuschak
Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes

I recently had a discussion with my broker about commission splits and when I would move on to the next commission split level (would have been easy to learn had we signed a contract, but we didn't...that's water under the bridge now). Since I am relatively part time it's taken me a while to get a decent dollar volume of deals under my belt. He claimed it still wasn't enough to be bumped to the next level.

Continuing on, I told him I plan to take the GRI and get a Broker's license soon and would like to be an associate broker. He said even when I do, the commission split won't change until I reach 2,000,000 in sales because it's not affordable for him.

I could tell he was getting frustrated with me, so I stopped pressing. But my main question is...why does it matter what volume of sales a Realtor does to attain a given split level? Is there a volume discount on E & O insurance or something? I would think that making 20 or 30% of a deal anyone of his Realtors brings in is still 20 or 30% - regardless if the Realtor does 100K in sales a year or 2 million.

Am I missing something? This really has me perplexed.

0Reply
20 views

7 Replies

Jump to latestLatest
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    17y

    Mark,

    I've been on both sides of the fence. If I were you, I would focus on money in your pocket. In my opinion, agents get stupid when they talk about "splits". One company might hand out great leads like candy, but have a lower split. Even still, you could probably still make better money, despite the lower split. And, believe it or not, those leads cost money, hence the lower split.

    I view non-productive agents complaining about splits the same way that I would view an unemployed person complaining about minimum wage. It just doesn't make any sense.

    Running a RE brokerage can be deceivingly complex. If a broker constantly makes decisions based on a feeling that "getting something is better than getting nothing" then they will soon be out of business. Regardless, you should at least have a written split schedule.

    If you truly respect your broker, I would go back to their office and say, "I want you to teach me how to be successful. I will do whatever you say, and I won't even talk about splits". And then do what they say, and gauge the results.

    If you don't respect your broker, then I would leave and go somewhere else.

    0Reply
  • Derek W.
    Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
    17y

    David's right. If they are supplying leads and education, just take what you get with a smile. If not, there are other brokers that you won't have to even have this split conversation with. There are some brokers that only charge a flat fee per transaction, and others that have you pay a fixed split until you cap, then you keep 100% the rest of the year. So you don't ever have to worry about splits.

    0Reply
  • Mark Yuschak
    OP
    Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
    17y

    It's not that I'm so worried about the splits.

    I guess I'm more curious about the logic that goes behind setting up a split schedule. As I said, why does it matter if 20% of a commission is coming from a $2,000,000 a year in sales guy vs. a guy who only does 200,000 a year? Why the disparity?

    As for the education... LOL. Leads? Yes, I've gotten a couple, but nothing stellar. And this isn't going to make me leave my Broker. I realize I could go somewhere else and do the flat fee schedules.

    I'm just more curious where the logic comes from with Brokers who do setup splits. And, it seems that all brokers who do splits, have the same school of thought with the 60/40 for someone under 1 mil, then graduate to 70/30, on to 80/20, etc.

    0Reply
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    17y

    20% of a small amount of business = not much.

    20% off a large volume of business = more.

    Each agent is an asset. Not all assets are equal. He needs to make more money of your lesser amount of deals for it to make sense to have you around.

    As cold as that may sound, that is the truth.

    0Reply
  • Mark Yuschak
    OP
    Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
    17y

    It's not cold at all....

    But I'm still yet to understand what difinitive "cost" there is for any broker to have an agent around. Sure, we're assets, and also a liability. But, to what extent are we a liability? And what methodology is used to assess a cost to that liability which would be used to determine a commission split? So, I go back to my original example, is E & O insurance, for example, more costly on a lower producing agent than a higher producing one?

    At the end of the day, again, him getting a 20% cut of any agent's commission regardless of their volume is still 20%.

    0Reply
  • Dave P.
    Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    17y

    At the end of the day, again, him getting a 20% cut of any agent's commission regardless of their volume is still 20%.

    Not really. The real question is how much time does it take the manager to get that 20% (or whatever %). Coaching an agent to get their first few deals done is much more time intensive than coaching an agent from going from 20-30 deals annually.

    We have a company policy that if you don't close 8 transactions a year, you can't be with us. In our market, that's about $1,600,000 in volume. Not a ton, but a good amount for the lowest standard in the office. The reasoning is simple, it takes a LOT of energy and effort to get someone from 0-8 deals. After that, they can pretty much earn for the company on auto-pilot.

    New (lower producing) agents cost the manager/owner/broker more money because they consume more time. At least, that's what I have seen.

    0Reply
  • Mark Yuschak
    OP
    Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
    17y

    OK. Now we're getting somewhere! lol..

    I guess I never thought about the coaching side of life since I got none and just run on auto-pilot.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free