Real estate agent commission vs agency commission
To understand the final commission paid to real estate sales agents it’s good to understand the revenue and expense models of a real estate agency office. Real estate agencies have provided much of the lead source of new vendors wanting to list their property for sale but the Internet is starting to change this – some would say for the better.
Real estate agents that are employees
When someone is paid a wage for doing their work they are paid the base salary based on the hours that they work and a commission based on sales performance. As a result the real estate office manager or sales manager is required to maintain pressure on each real estate agent to ensure they perform well consistently. If an employee doesn’t bring in more than they are earning they are a liability and a cost centre and they won’t last long in their job. Because the real estate agents role is primarily about sales success many agencies opt for a debit credit system.
Real estate agents on Debit/Credit
The debit/credit system is aimed at shifting the financial reward towards listing and sales success. The agent is paid a salary every month, usually a relatively low one, and when a sale is made these wages are deducted from their commission. If a real estate agent on this system performs consistently well they won’t be adversely affected. If they don’t perform well the agent will pretty much be earning a relatively low but consistent wage.
Independent real estate agents
An independent or commission only agent is completely dependent on commissions from sales so they are driven to perform well and provide great customer service. The selling of properties earns them their commission income and the great customer service gives them leads, referrals and recommendations (testimonials) that results in future sales.
There are aspects of every property sale process that needs to be managed by administration staff and many independent real estate agents still want to work under a recognised brand name to give them extra credibility but because they are successful in bringing in new clients AND selling properties they are able to negotiate a better commission split between themselves and the real estate agency office they work with.
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