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I have a basic working understanding of how sales commissions work, or at least I think I do. Can someone chime in to let me know if I have this right. I understand there can be fees associated with a given transaction but speaking generally...
Let’s assume 6% commission on the sale of a $500,000 home.
6% of $500k is $30k
Split with the buyer’s agent is $15k each.
If my split with my broker is 70/30, my cut is $10,500 (before agreed to expenses with broker).
So far so good?
I also understand that some offices will increase my split once certain commission goals are reached. For example spilt is increased to 90/10 once $100k in commissions have been earned.
In that case, my cut in the case above would be $13,500 right?
In a related question, if a realtor has $50,000,000 in real estate transactions in a year on a 90/10 split with the broker, assuming all transactions had a co-worker for simplicity’s sake.
6% of $50M is $3M
Split with co-broker is $1.5M
90/10 split with office’s broker is $1.35M (before taxes, expenses, etc)
I ask this because in researching real estate offices I’m seeing these kind of numbers for their top-producers. And I get that most realtors aren’t selling $50M in properties each year.
Are some agents really grossing $1M+ a year in some markets? Or am I not seeing something or misunderstanding the math?
How much of your revenue will your mentor take? I hear numbers like 20%.
Don't forget, you won't be on a W2. You will be on a 1099, and your commission won't be your paycheck. It will only be revenue, and you will pay ALL employee taxes that are currently matched or withheld by a W2 employer.
Some agents GROSS $1 million, but generally have team and staff, paid services, etc, to pay out of that gross. It would be a rare, very rare agent who would have income comparable to a $1 million salary without significant supporting staff.
And, those $ Million Grossers are often rainmakers, who get credit for sales that are done by associates on their teams.
How much of your revenue will your mentor take? I hear numbers like 20%.
Don't forget, you won't be on a W2. You will be on a 1099, and your commission won't be your paycheck. It will only be revenue, and you will pay ALL employee taxes that are currently matched or withheld by a W2 employer.
Some agents GROSS $1 million, but generally have team and staff, paid services, etc, to pay out of that gross. It would be a rare, very rare agent who would have income comparable to a $1 million salary without significant supporting staff.
And, those $ Million Grossers are often rainmakers, who get credit for sales that are done by associates on their teams.
Great info Mike, thanks for the reply. I know there is always more behind the scenes. As a newbie looking at things from the outside those are the things I don’t see. So even though Realtor XXXXXX is awarded Top 50 Realtor in the state with $50M or $100M in sales, that’s likely a realty team right? The agent has a staff, maybe a marketing specialist, a contact coordinator, that sort of thing?
Great info Mike, thanks for the reply. I know there is always more behind the scenes. As a newbie looking at things from the outside those are the things I don’t see. So even though Realtor XXXXXX is awarded Top 50 Realtor in the state with $50M or $100M in sales, that’s likely a realty team right? The agent has a staff, maybe a marketing specialist, a contact coordinator, that sort of thing?
Most of those $50 million plus folks "close" deals without ever hearing of the clients, never talking to them, and just being the figurehead.
It is common to close a deal with an agent and get a demand to change the selling agent's name in the MLS so the rainmaker, who had absolutely no interaction in the transaction with the client or the listing agent, gets credit toward their volume.
One of the little items in the business that calls for disruption, IMO.
Advice: Do NOT associate with a firm or team where you don't get public credit for your work, starting with MLS results.
When people say, "How many deals have you done in the last year," and scammers like Zillow or the Rainmaker say, "Koby did ZERO," it makes it harder to gain clientele.
Most of those $50 million plus folks "close" deals without ever hearing of the clients, never talking to them, and just being the figurehead.
It is common to close a deal with an agent and get a demand to change the selling agent's name in the MLS so the rainmaker, who had absolutely no interaction in the transaction with the client or the listing agent, gets credit toward their volume.
One of the little items in the business that calls for disruption, IMO.
Advice: Do NOT associate with a firm or team where you don't get public credit for your work, starting with MLS results.
When people say, "How many deals have you done in the last year," and scammers like Zillow or the Rainmaker say, "Koby did ZERO," it makes it harder to gain clientele.
Very interesting, my education has begun!
Thanks for your thoughts Mike. I have a lot to learn.
I tell my agents they can expect to take home 30 cents for every dollar they gross as you will pay taxes and expenses out of that. In my city, it would do you a disservice to be doing any number crunching with 6% as that would allow you to think you were going to make more than you were. Additionally, many rookies, get a 50/50 split when they start because they need so much support.
If you stick with your 6% scenario, then you can expect to take home $3,150 in net income after taxes and expenses in my area.
So in addition to those splits, you need to ask about transaction fees and franchise fees if you go with one of the national franchises. Those can add up cutting into your net.
I agree with MJ in that you must insist on credit for your own sales because when you want to leave the team, and you will at some point if you are successful, you will have no sales to show for your efforts.
I tell my agents they can expect to take home 30 cents for every dollar they gross as you will pay taxes and expenses out of that. In my city, it would do you a disservice to be doing any number crunching with 6% as that would allow you to think you were going to make more than you were. Additionally, many rookies, get a 50/50 split when they start because they need so much support.
If you stick with your 6% scenario, then you can expect to take home $3,150 in net income after taxes and expenses in my area.
So in addition to those splits, you need to ask about transaction fees and franchise fees if you go with one of the national franchises. Those can add up cutting into your net.
I agree with MJ in that you must insist on credit for your own sales because when you want to leave the team, and you will at some point if you are successful, you will have no sales to show for your efforts.
Great information Silverfall, thank you very much.
Make your life easy and learn how to figure your % without having to do all that math.
A 50% split would be 1.5%, 70% would be 2.1%, ect.
Keep in mind once you get to a higher Plateau it's easier to stay there and get to the next one. Only the very top will ever get to a Million a year, you'll be considered one of the best if you can bring in $200-400k a year.
Make your life easy and learn how to figure your % without having to do all that math.
A 50% split would be 1.5%, 70% would be 2.1%, ect.
Keep in mind once you get to a higher Plateau it's easier to stay there and get to the next one. Only the very top will ever get to a Million a year, you'll be considered one of the best if you can bring in $200-400k a year.
Of course that varies by city and location.
Great info Rakin, I appreciate that.
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