As a real estate agent, your commission split is your financial lifeline. It’ll determine how much you earn with each sale you broke, and it’s viable to increase as you continue to be a valuable asset to the company—in other words, you’re a big producer. So you’ll want to choose a real estate company that offers the best commission split to enhance your earnings.
The company with the best commission split in real estate is Keller Williams. Agents are on a 64/30/6 split: 64% to the agent, 30% to the Market Center, and 6% to KWRI. There’s a $3,000 cap on the KWRI fee. There’s also a commission cap annually, which will lead you to a 100% commission.
The Keller Williams commission structure is a little complicated, but it’s undoubtedly the best in the real estate industry. So keep reading to learn about how the Keller Williams commission structure works, why it’s great, and how it compares to other commissions types.
How Real Estate Commissions Work
The average real estate company will offer a more consistent split. If you were to agree to a 50/50 split in your first year, that would mean that you’re entitled to 50% of the negotiated commission. Your company gets the other 50%.
Let’s say you were listing a home for $400,000, the homeowner agreed to a 5% commission rate (there is no industry standard or set commission rate), and you were on a 50/50 split on all commissions.
The chart below describes how your commission is calculated.
|Sell a home for $400,000 on a 5% commission rate||$20,000|
|Divide by two (typically half goes to each the buyer and seller agent)||$10,000|
|Since you’re on a 50/50 rate with your broker, divide by two once more||$5,000|
This sale would yield you a commission check of $5,000. You’re taking home a mere 1.25% of the total sale price, after splitting the commission with the other agent and your broker. And if you agree to this type of commission split with your broker (50/50), this is how the cookie would crumble with each sale you’re a part of.
Now, you can probably see why real estate agents dislike this type of commission.
Fee-Based Real Estate Companies
Some real estate companies are known as “flat-fee” firms, or “fee-based” brokerages. These firms will require all office agents to pay a monthly (or annual) fee, paired with a 100% commission rate. It’s not unusual to pay $300 a month or $3,000 for the whole year.
This is an excellentcommission structure if you’re a consistent producer and get several listings a month. But if you’re only doing real estate part-time, you have a bad month, or you’re not selling much, then you might end up spending more than you’re bringing in. So don’t let this 100% commission structure trick you into thinking it’s a good financial strategy.
Other real estate companies boast a commission system known as “graduated commissions.” This means you’ll be able to bump up your commission split as you go. You might start at a 50/50 split in your first year, and be able to get to 60/40, 70/30, and so on as you continue to make progress over the years.
While it’s nice to see your efforts being compensated more justly, you will still have a significant portion of your commission taken out to go to the broker and other fees. Another notable issue with this pay structure is that you might be faced with a “cap.” So you will still owe your broker a small percentage of your earnings to cover associated costs, though it’s nowhere near 20%+.
Why Keller Williams Has the Best Commission Split
Keller Williams has a complex commission split that outsiders have trouble understanding. But we’ll try to break it down as clearly as possible, so you see the actual benefits.
All agents will start on a 70/30 split with Keller Williams. It’s a little more in-depth than that, so here’s how that breaks down:
- 64% goes to you, the agent (this is already relatively high, as some new agents have to settle for a 50/50 split during year one)
- 6% goes to Keller Williams International, also known as KWRI (yes, this is the other 6% of the “70” in your commission split)
- 30% goes to your Market Center or broker
So if your half of the sale brought in a commission of $10,000, here’s how that would break down in numbers.
|Portion of Commission||The Breakdown on a $10,000 Commission|
|Agent – 64% – What you take home from the sale||$6,400|
|Royalty – 6% – What goes to KWRI||$600|
|Market Center – 30% – What goes to your broker||$3,000|
You’d conclude this sale with $6,400 in your pocket, $1,400 more than you would earn on the average 50/50 split.
But that extra money in your pocket isn’t the only crucial benefit of the Keller Williams’s commission structure system.
The exact day you join with Keller Williams is known as your “anniversary date.”
Between anniversary dates:
- The 6% fee to KWRI will be capped at $3,000 (so if you generate enough sales and your total KWRI royalty fees end up above $3,000, you’ll take the overhead)
- The 30% fee to your broker will be capped (this is determined by your market center, but is typically between 8 and 10 homes sold)
Producing high volume sales will eventually bring you up to a true 70/30 split after subtracting the 6% KWRI fee. And you’ll eventually be capturing a true 100% commission once you generate enough sales to exceed your Market Center’s cap. Many agents will reach these caps mid-year, so they cash in on the 100% commission split for the remaining months.
In the previous example of generating a commission of $10,000, all of that money would end up in your bank account—you owe nothing extra to Keller Williams or your Market Center.
Keller Williams Profit Share Program
The 100% commission isn’t the only benefit of joining with Keller Williams. This real estate company also offers something called the “Profit Share Program.”
Here’s what that means:
- Each Market Center will take its 30% commission split on all agents precap and use this funding to cover all necessary expenses.
- A small amount of the excess funding to the Market Center will be distributed among agents, specifically those who recruited new agents to Keller Williams.
- You’ll get around 50% of the profits that Keller Williams gets from the agent you referred (after expenses).
- There are seven “levels” of sponsorship, so you’ll move up the chain, so to speak, as the agents you referred refer new agents.
- As you build the sponsorship chain, you’ll generate passive income, so you could earn 10% extra for your referral’s referral, and so on.
The video below will describe exactly how the Keller Williams Profit Share Program works:
Commission splits are an unavoidable aspect of real estate, but there is a way to use your split to your own advantage. The Keller Williams commission split is the best in the industry because:
- All agents start at a 70/30 split, which is already higher than the typical 50/50 new agent split with other companies.
- Sell enough throughout the year, and you’ll lock down 100% of your commission.
- As you recruit new agents to work for Keller Williams, you can also take home 50% of Keller Williams’ profit off of them.
Combining the commission structure and Profit Share Program, there’s nothing to lose and so much to gain!
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