If you want to be a real estate agent, you must have thought “What Does GCI Stand for In Real Estate?” GCI is a crucial part of the real estate business. So, knowing about GCI is the first and foremost step to become a real estate agent.
In this article, I’ll be talking about the meaning of GCI. Not just the meaning, I will also discuss how it is calculated and how GCI is split among different parties involved in a business.
GCI is an amount of money an agent gets from sellers or buyers as a commission from selling real estate properties. This commission is paid after the sale is finally done. Gross Commission Income.
But, knowing only the meaning of GCI is not enough to understand the term. To understand GCI properly, you have to know how it works. Here is a brief description of GCI and how it works.
What is the meaning of GCI?
The full form of GCI is Gross Commission Income. It is a real estate agent’s gross commission which he or she gets after completing business deals between sellers and buyers. The amount of GCI is fixed before the business deal finalizes.
However, the agent may not get all the money of the GCI. He has to split it with the brokerage house. An agent also has to pay taxes from his income. Moreover, there are other expenses like advertising, marketing and travel expenses. After deducting all of these extra costs, the amount of money left is the net income of an agent.
History of GCI
Interestingly, the idea of GCI did not come from any real estate business legend. The idea came from the American mechanical car engineer Fredrick Winslow Taylor. In 1911, he was working on the Scientific Management theory. In this theory, he discussed that employees get more motivation from financial rewards.
Taylor mentioned the system as a price-rate pay structure. According to this system, employees will get bonuses, a commission from the sales, and an attractive salary package based on their performance. Taylor believed that this process makes the workers more inspired to become better workers. As a result, a company can make more profit.
Later, Henry Ford, the founder of Ford Motor Company, adopted the Scientific Management system. He used the system for developing the ‘Ford Model of Production’ in his company.
The employees of the company were given specific job targets to fulfil on a daily basis. After completing the targets in due time, the workers would get financial rewards. Because of this method, the productivity of the Ford Motor Company skyrocketed. The company earned more profit and the theory was a success.
The system of Ford also reduced the time of making cars. A car which took more than twelve hours to build, took only two and a half hours to build after using the theory. This way, the time of production reduced and the company thrived.
Thus, the theory created by Fredrick Taylor gradually developed the idea of GCI in the real estate business sector. The more effort an agent gives for a business deal, the more he earns as GCI.
How to calculate GCI?
Let’s create a scenario to understand the calculation of Gross Commission Income. Suppose, you and Sam work for a brokerage house which deals with real estate. You are the agent for a seller who wants to sell a house and Sam is the agent for the buyer who wants to purchase the house.
After going through some details and business meetings, Sam and you agree to work for the seller and buyer for the commission of 6% from the property’s price. Now, the house gets sold for $250,000 and the deal is done. As the seller has agreed, he will give 6% of the money to Sam and you.
But, the commission will not go directly to your hands right away. The brokerage house will receive the money. Then the broker will split the commission between you and Sam which is 50/50 of 6%.
So, $250,000*.06= $15,000 is the total commission which both of the agents will get. Now, divide it and you will get $7,500 and Sam gets the other $7,500. Accordingly, $7,500 will be the Gross Commission Income from the business deal for you.
However, you will still not get your share of commission even after that. The broker also has a share from this commission as you work for his agency. Therefore, you have to go through some more calculation to get your net commission.
How does the brokerage pay the agent?
After calculating your GCI from the business deal, the brokerage will take its share from your and Sam’s commission. Assume that the broker agrees to give you 60% of the Gross Commission Income. So, you get 60% of $7,500 which is $4,500 and the brokerage house will get 40% of $7,500 which is $3000. Finally, your net commission will be $4,500.
However, there is another commission model that pays you 100% of your GCI. In this case, you will get $7,500 all to yourself. But, you have to pay a desk fee to the brokerage house. You will use their space and company name for your business. Hence, you have to pay for them.
Why is GCI important for real estate business?
The career and business of brokers and agents greatly depend on their GCI. In fact, your Gross Commission Income is the measurement of your success as an agent in the real estate industry.
As a new agent of a brokerage house, you may be paid a simple amount of commission. But, if you can increase the sale of properties, your GCI commission rate will also increase. Getting new deals depends on your skill and expertise. The more deals you can handle, the more commission you will earn. Thus, the brokerage will also increase your share.
Your GCI rate depends on the number of business deals and transactions of each year. That is why; you should always be active and looking for new transactions.
How can you develop your career as a real estate agent?
To develop your career, you have to set some goals. You can follow these steps:
- First, decide how much net commission you want to earn every year. Then, find out how much you have to pay to your brokerage house and what are your extra costs.
- Secondly, take a look at your last year GCI income. If you had an average or low income, find out why it happened. Try to overcome those problems and make new strategies.
- Next, calculate the costs and expenditures you will use for marketing and promoting yourself and your agency. Make a budget for that.
- In this modern age of the internet, you must have your own website. You can also reach out to your potential clients through social media. So, maintaining your social media is really important for your business.
- To understand better about being an agent, you can enroll on different courses as well. Working with an experienced agent will benefit your career a lot.
By now, I hope the article has answered the question of “What Does GCI Stand for In Real Estate?” A real estate business transaction involves a lot of people like buyers, sellers, agents, and brokers. They try their best to get the most out of the business.
The Gross Commission Income an agent gets from the transactions as his payment plays an important role in his or her career. So, Understanding GCI is very crucial for someone who wants to become a part of the real estate sector. Hopefully, this article answered a few questions for you.