It’s COMPLICATED!

As an agent, if you have a hard time understanding and explaining your commission plan and figuring out your split, you are not alone.

All the parts of real estate transactions are complicated to start with because of all the variables that can be in play, mainly because so much money is involved.

This is just one more reason why everything involved with commissions is complicated.

Compensation Plans – Complicated AND Confusing!

Most compensation plans are very confusing and agents often get lost trying to figure them out.

Because of the nature of the business – basically the cost of just being in real estate sales – brokers try to keep a cap on their costs, which includes franchise fees.  When a broker is affiliated with a major real estate company, they have to pay for that support.

One way to offset all their costs is to structure their deals with agents so they get regular income through things like desk fees.

Unfair Broker Charges

Sadly, some brokers don’t play fair and design their plans that way to avoid transparency and keep agents in the dark about how much they are really making off those agents, by charging them for various activities.

These predatory brokers keep agents confused by charging tiered splits with caps, transaction fees, desk fees, CRM fees, marketing fees, and more.   The idea behind all the complexities is to keep agents so tangled up they don’t understand how much they are NOT getting from their deals.

The best way to determine what your “split” of a sale will be is to simplify the math.  Instead of taking all the various fees you may be getting charged and doing a bunch of complicated calculations – take the easy way out.

If you want to know what you will receive – the percentage of your “split” – it’s pretty simple.  Start by ignoring the percentage of the sale price involved with the deal and stick strictly to the DOLLAR AMOUNT that came from the sale.

  1. Take the gross commission (all the money that would be paid to your broker)
  2. DIVIDE that into the amount the broker paid to you and you can then calculate the net percentage you would receive.

So, if your gross amount paid to the broker from sales was $160,000 and the net amount you received from your broker was $100,000, divide the $100,000 by $160,000 and the get the answer – in this example you are on a 62.5 percent split.

This is your true split.

Even the federal government has gotten involved with agent commissions because of some issues. Why would the government get involved in commissions? Simple, ONE reason that federal laws, including RESPA, were put in place was to prevent unfair competition, and – yes – one of the concerns was commissions. Specifically, “secret” rebates provided on commissions by some agents gave them an unfair advantage, amounting to a monopoly, in the areas they worked. So, were rebates forbidden? No, they weren’t as long as they are called out and put on the HUD statement, and a form 1098 is issued to the person receiving the rebate.

 

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