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What is 100% Commission Real Estate?

What is hundred percent commission real estate?

(Transcription) This concept was popularized and entered the mainstream over ten years ago and since then it’s evolved and has changed somewhat. Before 100 percent commission was part of the mainstream program that an agent could get a real estate company. The big talk was about splits, so an agent, let’s say a new agen,t would join a company and they would get 50% and then the company would get 50%, so that would be a 50/50 split. As the agent progressed, they might get 60% or 70%. Companies would recruit agents based on an 80/20 split or 90/10 split and then hundred percent commission entered the mainstream and said here’s a flat fee per transaction and you keep the rest of the commission we don’t care how much the Commission is you just pay a low flat fee. There was also another version of that where the flat fee could have been an annual fee so an agent would pay a fee of let’s say three thousand dollars at the beginning of the year and then the agent would keep the Commission that they earn 100% of the Commission they earn on all the transactions they closed that year. Over time I think that this concept has kind of evolved and changed and companies have looked to find ways to increase revenue and still be within that hundred percent commission model. What that term encompasses now are companies that often charge a monthly fee, so there might be a monthly fee in addition to the transaction fee. Often these companies will charge for errors omissions insurance you know so there might be a risk management fee on each transaction or the agent might have to pay quarterly or semi-annually for their insurance, there might be fees for high-risk transactions or a fee for having access to the office or having a key, basically there are other fees. So if you’re looking at a hundred percent commission brokerages, it’s important that you clarify any and all fees that you could infer working at that office. With Balboa Real Estate over the years, we’ve experimented with hundred percent commission programs to find what would be the best, the least expensive to agents so agents can save more of the commission that they make and of course the company can stay profitable, we have done a flat fee per transaction and we’ve done the annual fee where agents pay the annual fee, and and then get a hundred percent of what they earn, and we’ve always paid errors emissions on behalf of the agent. We’ve never had agents have to pay theirs separately. So we we found that in certain situations where the sales price was very high our E&O; bill would go up because it was how the insurance was assessed, based on the revenue commission, revenue of a transaction. We had agents that were closing three, four, five million dollar properties and making these commissions that go along with it that would increase our E&O bill and we were still charging a very low flat fee. Which would essentially make the company take a loss on those transactions so certainly we can’t stay in business taking a loss on those transactions, but we want to be the lowest cost one hundred percent commission company so we camp with a plan that we implemented over a year ago, that’s been working quite well. Our commission plan is a flat fee per transaction that is ten basis points of the sales price. So the easy math on that is if the sales price is seven hundred thousand dollars, then the flat fee per transaction is seven hundred dollars to the brokerage and the agent will keep everything else. If the sales price is eight hundred thousand then the flat fee to the brokerage is eight hundred dollars. Again, the agent keeps everything else, Balbo real estate pays the errors and omissions insurance for the agents. There are no other fees involved, just a simple flat fee per transaction to keep it very easy to understand and low cost as well. then of course if you have a very high sales price it allows the flat fee to the company to go up just enough to cover the E&O insurance on the agents behalf. If you’re interested in our Commission model, what we believe to be the best hundred percent commission model in the industry, please CLICK HERE

 

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How To Keep 100% of Your Real Estate Commission

The phrase “100% Commission Real Estate Brokerage” has been a popular trope for about 10 years. 100% Commission has taken on the meaning of a low-cost brokerage, typically where a licensee pays a small flat fee to the broker and keeps the rest of the commission. There are variations, but this the general idea.

It can be argued, from a purist standpoint, that 100% commission isn’t truly 100% commission because if a licensee has to give even $1 to the brokerage then it’s not a true 100%. While the term may not be a full 100% to the purist, it is very close to 100% and still far better than tradition brokerage splits.

However, there is a caveat to all this. A clever licensee can structure a transaction to where they keep the full 100% commission and not a penny less. I will show you two ways to make the broker fee a pass-through cost to the client so that they pay the broker fee rather than the licensee.

The first is on a listing agreement, when the licensee is a listing agent. Since there are variations of the transaction fee paid to the broker, we will use $500 as an arbitrary number for our example. Paragraph 3 of the listing agreement is where the licensee will put the listing fee percentage that is being charged. After the space for listing percentage there is the word “AND” with another blank space (see image below). In that space the licensee will put the amount of their broker fee. In the case of $500 the licensee can write something like “$500 broker processing fee” or “$500 brokerage administration fee.” This will cover the licensee’s transaction fee and allow the licensee to truly keep 100% commission.

100% commission real estate brokerage

The other way to truly keep 100% of the real estate commission is with the purchase agreement. Paragraph 7  is the allocation of fees. Section D, lines 8 and 9 are generic blank lines where the licensee can check a box for the seller or buyer and then write in a fee. In the case that the licensee is representing a buyer they can write check the buyer box on line 8 and then write $500 “processing” or “administration fee” to Balboa Real Estate.

This will ensure the buyer pays the licensee’s broker fee thereby allowing the broker to keep 100% of the commission.

If you want to learn more about a 100% commission real estate broker that services all of California then please contact us at info@balboateam.com

 

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Does Outbound Calling Work in Real Estate?

Real estate agents often ask, “does outbound calling work,” or, “does cold calling work?” The answer is at the end of this post, but first it’s important you know why. Real estate agency is competitive and has a long ramp-up period. New agents are super motivated and are eager to be proactive in order to drum up business. This means holding open houses for other agents, sending direct mail, and even picking up that ice cold sales phone to dial for dollars.  While outbound calling is  better use of time than additional training for agents, it’s not a good use of time.

Several years ago and before, let’s just say 2007 and earlier, outbound calling was still a fairly effective way of generating business. However, a lot has changed since then. The internet has become a huge factor in consumer thinking. If a consumer is considering a service or even using a particular agent they will go online and do some investigatory tail sniffing to see if they check out as a professional. This has created a major shift in how professionals and consumers meet. We’ve moved from sales-system oriented marketing to relationship-based sales. Social media and internet presence meet consumer research. Connections are made and quality informative content is delivered to consumers which often results in a sale. This is unequivocally a higher quality way for consumers and professionals to choose to work together. Consequently, it makes outbound calling look more desperate and less credible. The relationship model has has been naturally selected over outbound calling as the winning marketing strategy.

It’s not enough to just say that outbound calling is less credible as the reason why it’s not as good. It’s also important to mention that because it is an outdated method facing extinction, the conversion rate is worse now too. This makes it harder for the remaining die-hards still out there in the boiler room trenches. Will these outbound callers drum up any business through cold calls? Some might, but at painfully thin conversion rates which beg a bigger question – is cold calling a reasonable and sustainable longer term business model? The answer is simply NO.

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