Success as a Real Estate Agent For Dummies. Zeller Dirk

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      ❯❯ The graduated split: The graduated split is the most common compensation package. You start at a 50/50 split, which is increased to 60/40 and upward incrementally as you become more productive and your earnings reach company-established levels for graduation.

      ❯❯ The graduated split capped: Some companies put an annual cap on the revenue the company derives from the graduated split arrangement. After they collect the established amount of company commission income, the rest is yours. A per-transaction fee that doesn’t cap often accompanies this commission type. This is fair, in my view, because although you receive all your income beyond the cap, the company still has costs for each transaction beyond your cap.

      ❯❯ The graduated split rollback: Under this increasingly popular compensation arrangement, which is structured primarily for the benefit of the company, you receive a graduated split, but at the end of each year you roll back to 50/50 or some other established allocation. With this type of rollback, the company has a better chance of making a decent net profit from all earnings. Too often, company expenses and profits are covered by too small a group of agents. By rolling splits back at the beginning of each year, companies ensure that their costs are covered by commission revenue received early in the year. It also motivates agents to increase productivity in the early months to increase their splits over the rest of the year.

      ❯❯ 100 percent commission: Colloquially, this is known as the rent-a-desk arrangement. Agents on 100 percent commission pay a flat amount monthly to rent space and purchase a few services from the company. From there, they cover all their own costs and retain 100 percent of all the commissions they generate.

      ❯❯ Transaction fees: Many brokers charge agents a per-transaction fee of somewhere between $150 and $500 to cover the cost of processing the paperwork that accompanies a real estate sale.

      I started charging my clients a transaction fee of $150 in 1993. At that time, I was among the first in the country to do so, joined by only a few other high-producing agents. Over the years, I raised the amount to $495. Today, it’s the real estate companies that are charging the transaction fees to the agents. However, with a little advance planning and sales tact, you can pass the transaction fees along to your clients.

      The first step in being able to charge a transaction fee is believing that you’re worth the additional money. You can’t charge the fee if you don’t believe in your extra value because you won’t be able to defend why you’re worth more. Everyone is quick to point out that real estate commissions are negotiable. If that’s the case, why not charge more? If your service is better, your skills are better, and the outcome for your clients is achieved with less risk, you’re worth more money.

      To show my value, I explain to clients that when I first started real estate sales, agents had three-page agreements, whereas now some agreements are more than 50 pages long with disclosures included. I also note that agents now manage multiple inspections (such as radon testing, pest inspections, and so on) when before only one inspection was performed. Transactions involve more processing than ever before.

      ❯❯ Errors and omissions (E&O) insurance fees: Many brokers charge an E&O insurance fee on a per-deal basis, which often adds $100 to $250 to each transaction to cover premium costs. E&O insurance protects professionals should they make a mistake in service or representation. In such an event, the insurance company covers legal fees and settlement costs.

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      ❯❯ Companies with a large number of agents create a large listing inventory. As a newer agent, you’ll find it easier to get other agents to let you post and advertise on their properties, leverage their properties online on your own website, market behind their inventory with direct mail, and work open houses for them if they have 15 rather than 2 listings apiece.

      ❯❯ Large companies enjoy economies of scale, allowing them to provide a greater degree of service at a lower price per agent. As a result, they can offer more training, more marketing, and more exposure than smaller companies can afford to provide in most cases.

      ❯❯ Because of their size, large companies can negotiate better rates for online marketing ads; website-development costs; click-through ad banners; SEO costs; third-party online lead generators like Zillow, Trulia, and Realtor.com; and mortgage rates. However, large companies follow no hard-and-fast rule for how they direct their savings. Some companies decide to turn a larger profit margin for the company. Others – the ones you’ll most want to join – pass on the benefits to their clients and agents.

      ❯❯ Large companies hold a dominant portion of market share in their communities. As a result, they have the most prominent reputations and earn the greatest slice of regional business. They tend to have more inbound business, which can really help a newer agent.

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