I'm not sure how the EXIT Realty MLM rumor got started but as with most rumors, it’s just a distortion of the truth. You know, kind of like that game you played in school when you whisper something to a classmate like, “We can change the world” but by the time the last person hears it, the phrase sounds like, “Free paint for girls”. The game was played to teach how things can easily become mis-interpreted but it seems the school game has entered the Real Estate Industry. Maybe it originated from EXIT using the phrase “single level residual". Regardless, EXIT is nothing more than another service based Real Estate Brokerage, with an innovative incentive for Realtors.
What is it? I see it as an employee referral bonus with a royalty component added for referring an agent. Read on to understand the full story.
Let’s look at royalties closer. Royalties are payments made by one party to another party for continual use of ...something. Negotiate your contract right and get paid over and over again for doing the work once. This is true in the Music Industry, Sports Industry, Movie Industry, and now the Real Estate Industry. Just look at contracts by Tom Cruise, Jack Nicholson, Michael Jordan and my personal favorite Ozzie and Dan Silna who negotiated (IMO) the greatest perpetuity contact known to mankind.
EXIT Realty's "contract" pays a maximum "Royalty" of $10K per agent in a year, i.e. based on the revenues of the agent. It's that simple. No multi-level IBO's, 3rd tiers, 2nd tiers, ponzi schemes or anything else associated with MLM's. They also have additional benefits like retirement and death benefits attached to the "contract" but that's not the point of this blog.
Services companies are very focused on headcount. If you've worked in service industry of Corporate America then you know the importance of headcount. This applies to Real Estate Brokerages as well. How do you increase headcount? Acquisitions, Hiring, Recruiting, etc. Recruiting costs can be VERY expensive. I know this first hand, I’ve been a Corporate Recruiter for over 8 years for customers such as the CIA, NSA, and bunch of other three letter agencies. The easiest, fastest, and least expensive hires usually come via employee referrals and/or employees that recruit for the company. Will some of those people referred be successful and others not. Absolutely! The 80/20 rule still applys.
Let's look at this closely using RE/Max. RE/Max has over 120,000 agents. RE/Max is the 2nd largest Real Estate firm in the world. Do you think there's some correlation? Look at almost any service industry you'll see a correlation between headcount and revenues. Just as an FYI, the founder of EXIT Realty, Steve Morris is a former RE/Max agent. At the current growth pace EXIT Realty is on tract to be largest Real Estate Company in North America. Do you see a correlation?
There's an article by a blogger that makes the following statement, “…Therefore, Exit cannot sustain all successful agents. To my understanding, it is imperative that many agents fail".
Sorry to burst your understanding is completely wrong. EXIT Realty splits are 70/30 (no desk fees). Now let's assume every agent in the company is referred and EXIT Realty has to pay out 10% to another agent. EXIT is now giving a 80/20 split. Let's go deeper and say you're paying EXIT an additional 5% in fees per year. The split is now 75/25 (no desk fees). Are there any companies that pay 75/25 splits or better. Absolutely!
Some companies offer 100% commissions (with desk fees). Is it fair to say "to my understanding it's impossible for these companies to offer adequate training and are no more than glorified Real Estate Landlords?" Absolutely NOT! So why would EXIT need agents to fail? If that was the case tons of agencies would have gone out of business years ago.
Do some industries/systems benefit from people that "fail"? One might say small fitness clubs or gyms could fall into this category. Most small fitness clubs or gyms make their money from monthly memberships. They sign up as many people as they can but if every member were to come during core hours they'd be in for a little surprise. Is this true with every small fitness club. I doubt it.
What about our capitalism system? Love it, wouldn't trade it for anything; however, what would happen if every person in the US woke up with $5 million in their account. What would happen to Wal-Mart, Wall Street, and the Housing Market. Does our capitalism require some people "fail" or live below, at, or near poverty levels?
In the same blog the person mentions something to the extinct of how EXIT makes money. Unless we know the complete core business model of a company it would be very hard difficult to truly know how EXIT or any company makes money at the end of the day. For example, did you know that McDonalds is one of the largest (if not the largest) commercial land owner of real estate in the United States. Every year they collect over $1.5 billion per year in rental income. Is McDonald’s in the food industry or the real estate business? I have no idea because I'm not privy to their core business model. The same goes for EXIT Realty, RE/Max, Keller Williams, etc.
Here's an exert taken from the same blogger again, "Unfortunately, Exit Realty seems to fit the marketing methodology of many MLM's, eg [SIC] Amway, to the cue. There are a lot of company rallies, a lot of training DVD's, there is even a positive affirmation CD. And you are told to avoid negative people and think positive."
All I can say is thanks! Also I don’t recall anyone at EXIT telling me to avoid negative people but my mother did. Not a bad bit of advice too.
Honestly, I've never listened to the positive affirmation CD (almost forgot I had one). Mainly I've been listening to positive affirmations CD's for years. We even have our kids say positive affirmations and recite them back on occasion. Are we an MLM family?
Other People Efforts. Here's a simple question. Would you rather have one person make you $100 dollars or 100 people making you $1 dollar? Which did you choose? Depending on which one you choose you may want to take 15 minutes to Stop By EXIT Realty. It's not for everyone, just like anything in life. The great thing is the decision is up to you.