What are the typical pros and cons with a 100% commission real estate brokerage?
Are you interested in a brokerage where you earn more money?
Are you currently over paying at closing and missing out?
The pros and cons begins by comparing the 100% commission structure to a traditional brokerage structure.
1) Simple math here.
In a traditional real estate brokerage structure, the company takes 30% - 50% from the broker at closing. The percentage depends on the company and experience of the broker. There may be additional one time fees and/or recurring monthly fees.
For Example:
If an broker earns a $20,000 commission, and the commission split is 50/50, the broker keeps $10,000. In an 70/30 split, the broker keeps $14,000.
Many 100% commission real estate brokerages charge a flat transaction fee that typically ranges from $300 - $600. In this case, the 100% commission broker would keep $19,700 - $19,400 respectively. Far better than any of the splits mentioned above. Realty First does not have a transaction fee or any additional fees due at closing.
Yet, not every 100% commission real estate brokerage charges the same fees. Many use a transaction fee, though others may charge a lower fee and charge an additional recuring monthly fee. Some brokerages may only charge a fee once a year.
2) 100% Commission Real Estate Brokerages Are Gaining Favor.
Real estate brokerages offering low fees and splits have been around for years. Though they will have a profit center by other means, such as desk fees. Modern technology and business structures has allowed brokerages to pay their brokers 100% of their commission. Some examples of modern technology are with services like Digisign and DocuSign, which offer the ability for parties to electronically sign legal documents. You may be interested in reading about the 8 top e-signature applications on the market Click Here.
3) Exclusivity of MLS Data
In the past, MLS data was made available only through member offices. A home buyer was effectively forced to work with a broker to know what was in the market.
Now with IDX services and API, much of the MLS data is made available through private websites like Zillow, Redfin, Trulia, et cetera. MLS data can be syndicated across hundreds of websites within minutes of a listing going live. Home buyers and sellers can access MLS data easier and faster now than ever before. Interestingly, few people even know that there are websites for each local MLS in Oregon. There are few brokers that remember when home buyers had to use the local MLS sites to look for homes! There weren't any other options, crazy huh? Realty First uses Real Geeks for their IDX website services.
Pros and cons of the 100% commission real estate brokerage model includes public access to MLS data that makes the traditional real estate brokerage MLS monopoly obsolete.
4) Popularity of Working at Home
To do the pros and cons of the 100% commission real estate brokerage model, one must consider the rising popularity of working from home. Four common reasons for the work at home movement and popularity:
Offices seem antiquated and are no longer required for meeting with clients.
Tools such as Zoom, Skype, Duo, Discord, and more
Broker tools are web based now and no longer on a local intranet
People are more efficient with their time when working from home
As a real estate brokers, does it make sense for you to give a large portion of your commission to office related overhead you don't need or use?
How Do 100% Real Estate Brokerages Compare
Take a close look at what the brokerages offer you. Some 100% commission brokerages provide more benefits to you than others.
Take into account these pros and cons when you decide to join a 100% commission real estate brokerage:
1. Stability
The real estate markets are constantly changing. Through the years, markets experience rapid growth while other market slide into a downturn. In Oregon, our real estate market even has a seasonal cyclical element.
The hot property market of today may turn cold with little notice. The ability of a real estate brokerage to adapt to changes in the market matters. You wouldn't want to join a real estate brokerage that could be gone tomorrow.
According to a recent Forbes report, traditional real estate companies are on the decline. While, other more adaptable companies succeed in either a bull or bear market.
Will a 100% commission brokerage model help provide your business stability?
2. Costs
What are the pros and cons when considering the costs?
As mentioned earlier, not all 100% commission real estate brokerages charge the same fees. The three typical fees you may see include:
Flat Transaction Fee at Closing
Recurring Monthly Fee
Annual Fee
Every option has its own pro and con which depends on the broker’s production level.
What would you have made last year by choosing a 100% commission structure?
3. Hidden Fees
Consider the pros and cons of the hidden fees. Hopefully, there aren't any.
This is where the largest difference between real estate brokerages is apparent. Hidden fees need to be transparent and explained before changing brokerages. The typically hidden fees include:
Transaction Fee
State compliance Fee
E&O Insurance Fee
Final File Review Fee
Franchise Fee
Technology Fee
Mentoring Fee
What does each brokerage your looking at charge you in additional fees? Add them up and compare. With Realty First it is very simple, you keep 100% of your commission and pay $119.99 per month with no hidden fees. We like simple.
4. History
New businesses often close within the first two years. Many new business don’t fully take into account the overhead costs when compared to the generated income. A budget shortfall occurs with the cash reserves dried up. Real estate brokerages function the same as other businesses. The brokerage owner needs to show a history of staying in business and being resilient to change. Else, the principal broker will only one outcome, close their doors eventually
It's best to inquire about the history of the real estate brokerage and decide for yourself if they can weather the good markets and bad. Keep in mind, a strong bull market is toughest on brokerages with a 100% commission model. They can find it difficult to retain their brokers.
Predicting future success with any degree of certainty is heavily weighted on a history of long term stability and resilience.
5. Insurance
Errors & Omissions Insurance (E&O) coverage for real estate brokerages in Oregon is surprisingly not mandated by the state. Even so, Realty First carries a policy of $1 million which also includes coverage during showings and open houses. This is much higher than the minimum for the states that do require E&O insurance. Nebraska for example require a policy of $100k. Yet, not every insurance policy has the same coverage. Consider opening a policy for your own business activities. You should also consider what the brokerage insurance policy includes such as:
Single limit Coverage Amount
What the Policy Covers
Deductible You Are Responsibly For
Policy Exclusions
All Other Perils Coverage (fire, vandalism, hail, et cetera)
Representation of The Insurer
Has the brokerage obtained minimum coverage or did they invest more for additional coverage?
6. Support
There are some 100% commission brokerages that simply collect checks and provide little in the way of support and tools. An inaccessible broker that lives thousands of miles away provides little benefit to you. Has that person even visited Oregon?
Inexperienced principal brokers don’t have the tools and know how to support to their brokers. Oregon licensing laws don’t require principal brokers to be highly experienced. They simply need to be licensed for 3 years or qualify for a waiver based on other experience.
What is the quality of support you will receive and when is the principal broker available to help you?
9. Technology
The infrastructure of a modern brokerage determines the efficiency of conducting business. Having to email your contracts to your broker should frighten you.
Learning what modern technology tools your broker provides indicates whether the brokerage supports your growth.
10. Brand Name
Look for a 100% commission brokerage with a great brand name. Are the brokers currently at the company happy with were they are? Was it what they expected? You are the business owner and need to decide what fits your goals.
Small companies are not to be feared. A relatively small company has many advantages over slower moving larger companies. An interesting book to read on this topic is "Company of One" by Paul Jarvis.
Have you thought about moving to a 100% commission real estate brokerage? Our 100% commission real estate brokerage model has been successful for years. Realty First is owned and operated by an Oregon native. You will have support needed to be successful. Our Brokers have given us 5-star reviews due to the value the receive. With the help of our 100% commission model you have more money to invest in your business. By over paying you are missing out on building a successful and long-lasting career in real estate.
Contact Realty First Today!
Your next step is to have an informal chat directly with the owner, Derek Goude. Your inquiry will be kept strictly confidential. Click the button below now!