Good information, thanks

Hey Glen,

You share some real good info and thoughts, that are important to us all.

Take care!

RJH

Glenn,

You give a lot of good information to think about. I will also check the link that you are providing.

I did  not seriously look at the split, though should have done that.

Thanks

I always expected that if real estate companies would treat their agents like clients, everyone would prosper. However, those companies are rare.

Glenn, all new agents need to have proper training and that comes at a price. It's something that an agent can carry with them for a long time and helps produce great results. As far as your lead generation, I would be curious to know more details.

GLENN - You are 100% correct that the net income should take precedence over the split.  Many brokers pay lip service to the leads that they provide, but don't deliver in a consistent way to add to the agent's bottom line.  It seems like you have worked out the lead generation, and if you can assure people of closings, then you should not have to pay a higher split.  Agents should worry about how much money is in their pocket vs. how much is in yours. 

I dealt with this mentality in my previous sales experience before real estate.  I was working with a small marketing company that needed to sell their services to stay afloat.  They were struggling when we met each other, and I had the connections to put together bigger deals for them.  Their pricing structure was such that I was able to add my fee on top of it and make it worthwhile.  The deal hung up when they realized that I would be making more than them.  I told them that they should be worried about their bottom line, and not mine.

This mentality is pervasive with home sellers as well.  If I show them that they can generate more activity by paying out a higher commission than the "average" and end up netting more in their pocket, they should jump at the chance.  Instead, they think that the agents are making "too much" and they try to pay out as little as possible. 

It's all about supply and demand.  Home sellers that pay out the lowest commission have less traffic, and thus less potential buyers, which decreases the chance of finding the buyer that will pay the most for the home.  This is one of the reasons why FSBO's often lose out as well. 

Very well thought out post, Glenn.  I hope that it helps with your recruiting.

Hi Glenn!
Your blog creates some interesting conversations.  The split our company offers is no more than a reflection of what the agent made the previous year.  The more successful the agent, the higher their split.  We believe that the agents truly are independent contractors.  They each have their own company to run in which they are their own CEO. What we provide is an atmosphere of support, education and family that gives each agent knowledge that they will be treated fairly and honestly.  We supply them with more promotional options than they could ever use and recognize that each one will have a system that works for them.  What we teach our agents is to not chase the dollar, but supply the service to their clients...the income will follow.

Some great comments...  Training is obviously huge and is a very important part of the equation.  Even in the years 2002 - 2005 when I started into the business of real estate the stats were that 2/3rd of agents would leave the business in their first two years.  Recently at a Hobbs Herder conference one statistic that was interesting was that of agents who were in the business 5 years or more only 3% were netting what they expected when they got into the business (this is after 80+% of agents had quit the business).  Why?  Was it lack of training?  Most real estate companies of significant size invest in significant training programs on behalf of their agents.  The real challenge in my opinion is that agents are all coached to do the same thing.  Just listed / Just Sold card, Open Houses, calling FSBOs and Expired, building a referral network.  Where are 84% of consumers searching?  The internet...  These old school techniques don't work like they used to and those agents or companies that rank at the top of the search engines get the bulk of the new business.  So for companies to survive during the next few years they will need a solid online lead generation strategy or they will become yesterdays real estate companies.

If you look at the latest REALTOR magazine, the only company to grow significantly in terms of real estate sides and real estate income was Zip Realty.  Virtually every other company did less sides and had less income.  Where does Zip do its lead generation?  Online.  Without a doubt Zip has a good handle on lead aquisition and conversion costs.  When Zip becomes profitable they will be one of the dominant new real estate companies and guess what?  They do exactly what I suggest that real estate companies should do and that is lead generate.  Their model is the only E-Myth real estate company of size.  IMHO

I have been on higher splits for some time. I market and do almost everything out of pocket so I have to have that. Sounds like some of your agents are going to be great!

It's true as independent contractors most agents are very "independent" and want to make their own way.  In the past few years the market was hot, and lead generation was easier than it is today.  As a result many low split brokerage models flourished.

Now that the market has changed, lead generation is more difficult for most agents, business is not coming to them, the need to get out and find it. As a result 50/50 type splits where the broker provides leads, marketing materials and free desk fees will gain popularity as agents struggle to stay in the business.

This is a great market to start a team!