As a real estate agent, your commission split is your financial lifeline. It’ll determine how much you earn with each sale you complete, and you want to make sure that you have a good balance between making the maximum amount possible while also having the support and training required to not only be successful, but also grow your business in the coming years. You want to make sure that you choose a real estate company that provides a proven win-win compensation model that is fair and equally applied to all of the agents in the company.
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 companies commissions structure plans.
How Real Estate Commissions Work
The average real estate company will offer a basic commission split to newer agents. Most ask you 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, so we are just using this as an example), 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 calculation would work for each sale you’re a part of for the remainder of the year.
Now, you can probably see why real estate agents find it difficult to succeed under this type of commission structure. Yet thousands of new agents agree to this type of system without knowing any better. Hopefully, after reading this article, you will not fall into the same trap.
So what are the alternatives.
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 excellent commission 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. A serious drawback to this type of system is that the real estate brokerage company is not earning enough money to invest in training and support. In all likelihood, if you have a problem with a client or a transaction, you are 100% on your own. And without the initial training that was not provided in the real estate school, you will be lucky to know what to do to close buyers and sellers and actually sell any homes.
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.
While the graduated system looks good on paper, it pales in comparison to a CAP based system where there is a CAP placed on how much money you pay to your brokerage company. Even if you graduate up to a 80/20 split, you are still paying 20% of your commission on every transaction. Over the course of the year, if you a moderate to top producer, can lead to tens of thousands of dollars more that you are paying to the company.
When you know better, you do better. Read on to find out how to keep more of your hard earned money.
Keller Williams Has the Best Commission Split
Keller Williams has a complex commission split that outsider 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 no longer be charged that portion until your next anniversary date.)
- 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 at a market average price)
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 in the first quarter to 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.
I know from experience, that in my best years of sales, my actually commission split with KWRI worked out to be 95/5 with 95% going to myself. This occurred because I sold enough homes on a 100% basis that the math actually worked in my favor. Each additional sale put more money in my pocket. Any the level of support and training from the brokerage did not diminish, because I had already fully funded my contribution for the year.
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 agent’s precap and use this funding to cover all necessary local office expenses.
- After the Local Keller Williams market center pays for its expenses, the office calculates its profit on an monthly basis. The owners have already agreed that roughly 46-48% of the total profits will be shared back with the agents that helped attract new agents to Keller Williams. This is known as the profit share system.
- If you are one of the agents that attracted another agent, then a portion of that profit share is distributed to you are your sponsor for a total of 7 tiers of distribution.
- This payment is made only if the agent that you attracted was productive for the month (had a sale), contributed company dollar (the 30% to the market center and wasn’t capped) and the office was profitable.
- As you build the sponsorship chain, you’ll have the opportunity to earn passive income, tied to profitablity. This program is not subject to a wall street share price of other outside factors.
- For some associates, like myself, they earn enough in profit share to cover the other cap amounts paid to KW.
- Translation, as part of the 100% plus club, KW pays me more each year than I pay them. And this same opportunity is available to you.
- Sounds a lot better than a 50/50 split.
- The video below will describe exactly how the Keller Williams Profit Share Program works:
Other Companies Providing Competitive Commission Splits
Considering all the aspects of KW’s commission split and profit share system, it is definitely the best real estate company for agents. However, some other companies offer great commission splits to the agents as well. Here is a list of companies and their commission split structure you should know about:
Sotheby’s International Realty is an international real estate company that deals with luxurious residential properties. The company follows a traditional style commission split structure. Usually, Sotheby has a 70/30 commission split for agents.
Sotheby is an international brand. Thus, it has offices all over the world. Each office works independently. Therefore, they have different commission split structures. But the 70/30 split structure is a popular choice in many offices. Similar to Keller Williams, the agent will take 70% of the commission, and 30% go to the office.
The commission split can be improved in many offices, and it will never get lower than the split structure an agent has started with. Moreover, Sotheby’s has a cap system. The cap amount is also different, just like the commission structure. Depending on the locations of the offices, it can be $18,000 to $30,000.
When an agent reaches his cap threshold, he will be charged with lower fees. So, it is different from the cap system of Keller Williams. After reaching the cap, the agent has to pay per transaction instead of commission percentage. One of the best parts of the company is the training and professional help provided to its agents.
eXp Realty is a virtual real estate company. All the business-like marketing, selling, and buying happens in a cloud-based system. It is a great platform for passive income. The commission split structure for all the agents is the same which is 80/20.
So, the agent gets 80% of the commission when he sells a property online and gives the 20% to the broker. Agents can get 100% commission after they pay a $16,000 cap to the company. Therefore, an agent has to pay $16,000 to the company by giving 20% of the commission. After that, he or she will enjoy a 100% commission rate for the rest of the year.
Hence, the commission structure is great for agents who prefer working for eXp from remote areas. The split structure may seem better than Keller Williams too.
But eXp Realty has a transaction fee for every agent. Unlike KW, an agent has to pay $250 per transaction even if he has reached the cap. The transaction fee will be reduced to $75 for the rest of the year until the anniversary date, once the agent has paid $5,000.
Besides, agents give $40 per transaction as a risk management fee to the company. This fee will also be capped when the agent pays $500. Furthermore, agents have to pay another $25 for every transaction without a cap as a review fee to the brokers.
Real Estate Maximum or RE/MAX is a U.S.-based international company that is among the top ten best real estate companies in America. The company has an agent-centric commission split structure. It offers different commission split structures based on the performance of the agents. Most of the agents work on a 95/5 split structure.
But the 95/5 commission structure is suitable for agents who make a high amount of money from their commissions. These agents enjoy 95% of their commission and give only 5% to the RE/MAX office.
However, the agents have to pay a desk fee for all the benefits and support they get from the company to make their business successful. Depending on what resources an agent is using, the desk fees can be $300 to $2500. The agent has to pay the fee every month even if they have not done any property deal.
There are other commission plans for agents who do not make a high volume of money every month. They are known as the RE/MAX Alternative Payment Plan. An agent who grosses less than $25,000 has a 60/40 commission split. Once the agent reaches a limit of $23,000 to the company, they can get a 70/30 structure. This structure also has a threshold of $23,000, and upon reaching it, agents get 80/30 commission splits.
As you can see, there is no option for agents to get 100% commission like Keller Williams. Besides, agents have to pay other fees. But the commission structure is still attractive to agents.
Berkshire Hathaway HomeService is another American real estate company that is one of the trusted real estate companies right now. It is a new company compared to most others in the market. The company does not have a fixed commission split for the agents. The commission structure starts from 60/40.
The lowest commission split structure is 60/40. The agents have 60% and the company takes away 40% of the commission rate. When an agent starts to improve their business over time and experience, he or she can increase the number of sales. Then, the company lets the agent negotiate the commission structure for better splits for the agent.
So, if you have started with a 60/20 commission split, you can improve the split to 70/30 or even 80/20 when you start selling more properties. But there will also be a 6% transaction fee.
New agents will find it difficult to work with the company. If they are dedicated enough to build a career with the company, they can eventually improve their commission structure. Berkshire Hathaway HomeService understands that the new agents need support. Therefore, the company provides training and other financial support to the new agents.
Century 21 a well-known real estate company for new agents. It offers a 50-50 commission split. Hence, the agent and broker each get 50 of the commission made by the agent.
Similar to Berkshire Hathaway HomeService, the agents will get the chance to improve their commission structure from a 50/50 split. Century 21 is a great company for aspiring agents because it does not take any desk fees from the agents. The agents only have to pay 8% as a franchise fee. Agents pay this fee whenever they sell a property.
The company represents itself as a modern-day real estate company. Like Keller Williams, this company also provides training for agents. Century 21 has a good health care package for the agents working under it. The insurance plans provided by the company are also beneficial for the agents.
Era real estate is a well-known real estate company. It was established in 1972. It offers many tools and facilities to its agents for more efficiency. Era real estate does not clearly state its commission split online. The reason behind that is because they have a custom commission plan exclusive to each office and market.
However, the commission structure is good enough according to agents that worked there before. Considering how old and renowned this company is, you can choose Era real estate as an alternative to Keller Williams, especially if you are a new agent. Just like Keller Williams, Era real estate is very agent-oriented and technology-focused.
It has many facilities that can help you grow as a real estate agent. I cannot explain all of them here due to the limited extent, but some that are worth mentioning are their agent support and training program for new agents.
Era real estate has separate departments for proper management of documents and quick-processing of commissions. All these make the life of agents easier. Agents can enjoy 24/7 logistics support, thanks to their call center. They even have employed a separate roster of employees to support the agents.
Era real estate’s training program includes self-paced training courses and virtual classes to help you grow as an agent. Other facilities include a mobile app, CRM tool, SMS marketing, and many more. If you want a reasonable commission while gaining experience for a flourishing future, Era real estate can be a great choice.
Coldwell Banker offers one of the most lucrative profit shares among the real estate companies in the market right now. With various tools, resources, and technical support, Coldwell Banker can be easily the best alternative to Keller Williams.
Coldwell Banker offers an 80/20 split to their agents, meaning the agent takes 80 percent of the commission and the office takes the rest. It has a cap of 15000 dollars which means once the office receives 15000 dollars a year, the agent pockets 100% of the commission. Coldwell Banker also has no desk fees and remunerative recruiting incentives.
Its royalty fee is 6.5% but you can overcome that as well. It gives you certain milestones to overcome. Once you do that, it offers a total rebate of the royalty fee. As far as technology-related facilities are concerned, Coldwell Banker does not lag there either.
It offers features like CB National Tech Suite, Online Education, DocuSign & ZipForm Accounts, HelpDesk Live for IT & Marketing, IDX Websites, Online Office Cloud Dashboard, CRM tool, Lead GenEration Tool, Single Property Website, and many more.
With all these facilities to help you transcend as a real estate agent and also the lucrative commission split, Coldwell Banker can easily be a substitute to Keller Williams.
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 attract new agents to work for Keller Williams, you can also take home profits from the office owners.
Combining the commission structure and Profit Share Program, there’s nothing to lose and so much to gain!