New agents have to do a lot of work to get their real estate business up off the ground, work that can get expensive quickly. Concern over costs and income means that many new agents take only one thing into consideration when picking a brokerage: fees. While obviously important, choosing a brokerage only because it charges the lowest fees is shortsighted and often damages new agents in the long-term.
What Do Real Estate Brokers Offer Agents?
Or in other words: what do agents get in exchange for a percentage of their commission? This is a crucial question, especially for newer agents, because a good brokerage provides many value-added services that improve an agent’s skills and increase their professional mobility.
Training is perhaps the most important of these services. The classes required to get a real estate license do not teach new agents how sell houses; they teach agents to how obey the law and treat customers ethically. While crucial, this knowledge does not automatically translate into successful sales techniques. The best way to become a talented sales person is a combination of classes and working with experienced professionals. A good brokerage will give you both.
In addition to training, good brokerages also provide important, concrete things an agent requires to build their business and network like:
- Office Space
- Marketing and Advertising Materials
- Networking Opportunities
- Office Lead Gen
- Social Media Presence
- Administrative Staff
- Open House Assistance
Some brokerages will offer all of these things, other offices will have a few, and some will have none. Though all these services are not required for a new agent to be successful, a combination of them gives agents the support and background they need to thrive. Before writing off a brokerage or office because of high fees, find out what that money pays for—and if it can help you.
How Much Do Brokers Charge Their Agents?
Brokers charge their agents everything from a flat fee (say $200) per commission and no monthly fees to 50 percent or more per commission plus monthly fees. If they employ different kinds of agents or a mixture of part- and full-time ones, some offices even have a few different fee structures. Let’s break this down with some real numbers.
An agent sells a $100,000 house and earns a $3,000 commission.
Here’s what the agent owes the broker in a high-split scenario:
- 50% of $3,000 = $1,500
- $300/month in desk fees.
- The agent pays $1800 and takes home $1,200
This is a very high commission split and desk fee scenario. A more likely one would be a broker that takes 50 percent but pays the agent’s desk fees and provides a good amount of training or institutional support. Again, if the fees or split scenario is high, investigate how much of that money comes back to agents through value-added services.
Here’s what the agent owes with the common 70/30 split:
- 30% of $3,000 = $900
- $300/month in desk fees.
- The agent pays $1,200 and takes home $1,800.
At first glance, this is a much more attractive offer than the higher split scenario above, and for some agents it will make more sense. Perhaps you excel at social media or already have previous sales experience; office advertising support might be less important to you, and you’d rather walk away with more money.
But if that higher split brings you valuable support and training, consider it. If the agent working at the 70/30 office—and one taking home more money per deal—sells five houses in a year, they earn $9,000. If the agent making less per deal sells eight, they earn $9,600. If they sell 10, they earn $12,000.
Bottom Line: If a broker’s fees seem high upfront, look for the kinds of value-added services that office gives its agents. If those services will help you hone your skills and build your business, it might well be worth the higher fee.
Stay tuned to the ZipperAgent blog for more tips and advice about building your real estate business.
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