4 min read · February 21, 2023

Why Splitting Commissions Is Antiquated in Real Estate

commission splits

Did you know that 2020 saw the sale of 5.64 million existing homes? If you’re a real estate agent looking to get in on the action, then you’re probably wondering about traditional commission splits with brokerages, and why these methods of compensation are showing themselves the door. 

While real estate compensation hinges on the number of transactions you close, it’s always been a common practice for realtors to split as much as 50% of their commission with a brokerage. As such, more and more realtors are considering 100% commission models. 

There are several ways realtors traditionally receive compensation. However, many of these splits are antiquated, paving the way for 100% commission. 

To better understand the importance of the 100% commission model, you first need to compare it to its predecessors. Let’s take a look. 

Traditional Split

It’s traditional for brokers to compensate real estate agents by sharing any gross commission as collected by the broker. The broker and agent agree on the split, and it’s customary to reflect how much support and the types of services the broker provides. 

If the broker and real estate agent split the commission, the split is usually dictated by what percentage of business volume the agent brought in, with productive agents garnering higher splits. 

Referral Fee Compensation

Another type of split focuses on referrals from one brokerage to another. These referrals are deducted from the gross commission before it’s split. Before sending over a client, the two companies negotiate a price for the sending client. 

The sending brokerage might receive as much as 50% of the commission, depending on what the terms were, before sending the client over.  

Real Estate Franchise Percentages

It’s common for major franchises to charge a percentage fee right off the bat, taking it from the top of the gross commission. This fee also comes off the gross commission before the broker splits it with the real estate agent. 

Lesser Known Splits

You may find that a brokerage pays its agents a salary instead of a commission, although this is less common. Other brokerages might pay agents a base salary and a small commission for each transaction.  

100% Commission 

Are you looking to forego traditional commission splits to keep a larger piece of the pie? 

Enter the 100% commission model. As the name suggests, you keep 100% of your commission. It’s that simple. 

However, there are fees you’ll pay, but these fees are upfront, and in bold print, so you know what to expect. 

The 100% commission model might seem intimidating for new agents. If this sounds like you and you’re new to the industry, you might be leery of a fixed monthly bill while looking for clients and building a name for yourself. However, you’ll still have plenty of support, and when you do secure clients, you’ll keep 100% of the commission. 

What’s not to love?

Traditional splits might be 50/50, 70/30, and so forth. But with a 100% commission, you keep the entire commission and are only responsible for paying the brokerage a set fee per transaction, regardless of how much the commission is. 

Experienced agents gravitate towards this model because of their established clientele list. They complete a transaction, pay a flat fee, and reap the rewards of their full commission. 

Essential Details About 100% Commissions

Keeping your entire commission is enticing for many agents as it boasts financial benefits. But it’s important to know what this type of commission model might entail, depending on the brokerage you work with. 

Let’s take a look at some crucial factors to consider concerning the 100% commission model.

Pay the Brokerage

A brokerage will always require some form of compensation from real estate agents. Even if you have 100% of the commission, you still need to pay fees to participate in your brokerage.

These fees vary from brokerage to brokerage. Fees might include a flat fee per transaction closed, monthly desk fees, compliance fees, yearly fees, administrative fees, technology fees, and more. These fees go towards the brokerage’s maintenance and sustainability. 

If you choose to join a brokerage where you can keep 100% of the commission, be sure to look for hidden fees. Ensure the brokerage is transparent with fees and read the fine print before signing up. 

Upfront Insurance 

Should you have a 100% commission, you’ll need to pay insurance upfront. Insurance protects you should there be an error in property listing, negligence accusations, professional mistakes, etc. 

However, you’ll need to pay this upfront, and it’s usually a large sum of money. You may need to pay cyber liability insurance and general liability insurance, so be sure you’re prepared to pay out this much cash before entering into a 100% commission brokerage.  

Virtual Communication

You might be used to meeting with clients at an office. However, most 100% commission brokerages operate remotely, so you’ll need to be comfortable with virtual communication. This includes virtual communication for important deals, meetings, reviews, and signing new agents. 

This might be challenging for new agents who need assistance with closing deals, so be sure you’re comfortable with this type of communication. 

Is 100% Commission Right for You?

If you’re an experienced real estate agent with the capital to pay for insurance upfront, an established clientele, and comfortable working remotely, then the 100% commission model might be an ideal solution. Many real estate agents no longer want to split their commission with brokerages, and if you don’t mind paying flat fees per transaction, along with monthly brokerage fees, then a 100% commission model is worth pursuing. 

Pinnacle Realty Advisors can help you jumpstart your career. Check out our pricing plans here.