WHAT IS GCI (GROSS COMMISSION INCOME) IN REAL ESTATE

WHAT IS GCI (Gross Commission Income) IN REAL ESTATE?

Robert EarlUpdated: Pre License, Post License

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 becoming a real estate agent.

In this article, I’ll be talking about the meaning of GCI. Not just the definition, I will also discuss how it is calculated and how GCI is split among different parties involved in a business. 

Gross Commission Income. GCI is the 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 made. 

But, more than knowing the meaning of GCI is needed 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 complete form of GCI is Gross Commission Income. It is a real estate agent’s gross commission that 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 only get some money from the GCI. He has to split it with the brokerage house. An agent also has to pay taxes from his income. Moreover, other expenses include 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 gross commission income 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 sales, and an attractive salary package based on their performance. Taylor believed that this process inspires the workers to become better. As a result, a company can make more profit.

Later, Henry Ford, the founder of the 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 fulfill daily. 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 that took more than twelve hours to build took only two and a half hours after using the theory. This way, the production time was reduced, and the company thrived. 

Thus, the theory created by Fredrick Taylor gradually developed the idea of the gross commission income matter 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 – GROSS COMMISSION INCOME?

Let’s create a scenario to understand the calculation of Gross Commission Income. Suppose you and Sam work for a brokerage house that deals with real estate. You are the agent for a seller who wants to sell a home, 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 a commission of 6% of the property’s price. As the seller has decided, he will give Sam and you 6% of the money. The house is sold for $250,000, and the deal is done. 

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 both agents’ total commission. Now, divide it; you will get $7,500, and Sam will get the other $7,500. Accordingly, $7,500 will be your Gross Commission Income from the business deal.  

As you work for his agency, the broker also has a share of this commission. However, you will still not get your percentage of commission even after that. Therefore, you have to calculate more to get your net commission.

HOW DOES THE BROKERAGE PAY THE REAL ESTATE AGENTS?

After calculating your GCI from the business deal, the brokerage will take its share from your and Sam’s commission. Assume 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, another commission model 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. The more professional you are with clients will also impact the commission rate that you can charge. Thus, the brokerage will also increase your share. 

Your GCI rate depends on the number of business deals and transactions each year. That is why; you should always be active and looking for new transactions. 

How to Increase your Gross Commission Income

One way to increase your GCI in real estate is to target a higher average sale price and ensure they get the most possible real estate sales. The sales price of the property and the property’s final sale price will determine the CGI in a property transaction. The agent will make more money if the final sale price is higher.

Another way is to increase the sales volume through the implementation of consistent lead generation and marketing efforts. Successful agents are always looking for ways to increase the total sales volume for themselves and their teams. Adding a buyer’s agent or other agents to a team can yield a more significant monetary reward.

Brokerage fees from companies that do not have a 100% based broker split commission structure can significantly decrease an agent’s gross commission income. This is true because they calculate GCI in real estate after brokerage and transaction fees. Most brokerages have a different type of structure. They are looking for more income and may charge additional fees or a higher percentage to the agent. This can impact an agent’s total earnings on an annual basis. Finding the company that offers the best real estate commission rate on not just a single transaction but over the entire year is critical in what an agent makes.

Marketing fees or office rent will impact the agents financial outcomes concerning the total net income.

DOES GROSS COMMISSION INCOME MATTER TO A REAL ESTATE AGENT?

It sure does. The amount of real estate commission an agent brings into their business is vital in your real estate career. Real estate agents need to look at their gross commission income and net commission income on a monthly and quarterly basis. They must ensure they pay only a few referral fees in a real estate transaction.

Agents can control their amount of gross commission income.

When real estate agents generate more leads, charge a fair commission rate to sellers and buyers, and limit seller concessions, they will see their average GCI rise.

Any good real estate coaching program will make this a critical personal performance measurement for the future million dollar agent. It is worth keeping track of the final amount of commission income you are taking home annually. This is the basic definition of monetary success.

Pay attention to your personal performance.

The average real estate agent usually needs to take the time to understate how much net income they wish to make and how many parties are taking a piece of their commission income.

To develop your career, you have to set some goals. You can follow these steps:

  1. First, decide how much net commission income you want to earn yearly. Then, find out how much you have to pay to your brokerage house and your extra costs. 
  2. Secondly, take a look at your last year’s GCI income. If you had an average or low income, find out why it happened. Try to overcome those problems and make new strategies. 
  3. Next, calculate the costs and expenditures you will use for marketing and promoting yourself and your agency. Make a budget for that.
  4. In this modern internet age, 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. 
  5. To understand better about being an agent, you can also enroll in different courses. Working with an experienced agent will benefit your career a lot.  

Conclusion 

What Does GCI Stand for In Real Estate

By now, I hope the article has answered the question of “What Does GCI Stand for In Real Estate?” A real estate business involves many people, like buyers, sellers, agents, and brokers. They try their best to get the most out of business. 

The Gross Commission Income, an agent gets from the transactions as his payment, plays an essential role in their career. So, Understanding GCI is very crucial for someone who wants to become a part of the real estate sector. Hopefully, this article answers a few questions for you.