2 min read · March 23, 2023
Real estate has been good business in recent years with over 6 million home sales in 2021 and strong sales in 2022. On top of that, home prices rose to previously unseen heights. That means a better agent commission for each sale.
Of course, some of the predictable agent happiness was offset by broker fees. With the market so hot, agents might question why they paid brokers anywhere from 30 percent to 50 percent of the commission on a sale.
There is an alternative known as the 100% commission sponsorship. If you’re looking for a change, keep reading for our real estate guide to this commission model.
The 100% commission sponsorship model takes a different tack with the agent-broker relationship. Rather than the broker directly employing agents, the broker runs a brokerage-as-a-service model.
In essence, the broker facilitates the actual transactions, but the agents maintain control over the how of running their own businesses. The agent functions as more an entrepreneur than a traditional real estate agent.
Since the agent takes on the lion’s share of the work for each sale, they keep the commission.
Any agent might rightly wonder what brokerage-as-a-service actually offers. The business model varies, but the brokerage performs two key functions.
The brokerage maintains a license that agents can work under legally. Without that legal cover, the agents can’t work.
The brokerage also provides the tools required to actually close sales. Beyond that, the service may offer a fairly extensive or limited range of options.
For example, one service might offer you marketing materials or training, on-demand broker support, and a sophisticated, cloud-based virtual office. A different BaaS company might only offer some or even none of those benefits.
This model offers some clear benefits. The one that most people care about is control. Rather than running a method the broker approves of, you decide how you’ll approach the sales process.
That approach lets you build your own brand around your style of sales. This model also lets you hire other agents to work for you, as though you were a broker.
Since the brokerage takes a pass on the traditional split, they need an alternative method of covering costs. There are two main approaches that they use for this.
Some services charge a fee for every transaction that you close. The company determines the amount, but it’s almost inevitably lower than what you’d pay under a normal commission.
The other main approach is a subscription model where you pay a monthly flat fee.
The traditional real estate commission split doesn’t necessarily favor brokers, but it often does when the market is hot. The traditional model also leaves you following someone else’s playbook to get your agent commission.
As the above real estate guide notes, the 100% commission sponsorship model has the broker acting as a service, while the agent takes the lead. You build your own brand that adheres to your values or sales strategy. For many agents, that makes the model worth it.
Pinnacle Realty Advisors offers a 100 percent commission model. For more information, contact Pinnacle Realty Advisors today.