The real estate industry abides by the 30-70 rule: the real estate commission split works when the broker takes 30 percent while the agent takes the remaining 70 percent. The broker gets a piece of the pie because of the assistance provided to the agent. Whether this comes in the form of training or having a desk in a cubicle, the broker takes part in the chain of events that lead to the closing of a transaction.
While 70 percent may seem like a reasonable amount to receive, this formula for the real estate commission split is not as cut and dried as it initially seems. Deducting the broker fees from the gross commission is usually not the bottom line for agents. There are other considerations that affect how the commission is actually split.
Other than the 30 percent, other fees may be charged to minimize the end result. Additional charges may come in the form of franchise, document storage, monthly, internet usage, or receptionist fees. All of these separate items can add up to a significant amount for the broker that will reduce the net commissions.
Experienced agents know that relying on the broker does not make for good business. It is becoming more vital for agents to see their operations as a separate profit center and an individual business entity. The broker functions as a guide that helps the agent be fully compliant with the complexities of real estate transactions.
An entrepreneurial approach in real estate should follow the path of other businesses. Capital investments would have to be made in order to make it competitive. In the case of agents, the receiving end of these investments would be the agents themselves. For example, professional websites and advertising can be purchased. There are different ways to promote the business and the cost of each is minimal relative to the positive effects they can pose to the venture.
In an ideal setting, an agent can prioritize making investments in the business in order to promote it. However, not every agent is in the position to allocate the resources as capital. This creates a tricky situation: are these investments necessary?
Investments such as these precede the opportunity to generate revenue because of their ability to produce new and quality leads. As with any seasoned agent would attest to, fresh leads are the lifeline of the business. The shift in perspective from sales person to business owner can lead to more opportunities and therefore, more financial security from real estate agent earnings.
There is an evolution to the real estate commission split. Instead of the 30-70 rule, which often has fluctuating broker portions, is the setting of a specific amount as a broker fee. The charge is done per transaction and allows the agent to keep 100 percent of the commissions.
This situation represents the best of both worlds. Not only is there still an access to the guidance and support system provided by brokers but there is also an opportunity for the individual business to grow by providing enough capital from real estate agent earnings.