How To Build A Business On Value-Based Commission Splits

7 Oct 2021 · 2 min

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1:58

A real estate broker explains how to structure commission splits around the value you provide agents rather than just the percentage. Aim for roughly 25% payout on listings and 45% on buyer side, with a 60/40 listings-focused mix to hit a 31-32% blended payout to your team.

Questions this video answers

About 25% payout to agents on the listing side.

About 45% payout to agents on the buyer side.

Generally between about 30% to 35% payout to the broker and salesforce (i.e., what is paid out).

A listings-focused business (recommended 60/40 listing-to-buyer split), which yields roughly a 31–32% blended payout.

How do you build a business where you are giving less of a split than most of certainly brokerages, but most real estate teams and we call them value based commission splits because you need to be in a position where you provide so much value to your agents that the split, the percentage is irrelevant. Their take home is the thing that's meaningful. So they've, you've got, you're spending money on lead gen and you're spending money on overhead and you're spending money on people. All of those are their systems in place to provide all the value to the front stage, to the salespeople so they can spend more time in the activities of sales people to make more money per unit of time they put into their business. And we touched on that a little bit as well. And so value based commission splits needs to blend out at about a third. So on the listing side generally there's massive leverage on the listing side where that needs to be at about 25% or so payout to agents. And on the buyer side it needs to be about 45%. So a 5050 business buyer and listing, you'll be right in the middle. You'd be about 35% payout. And we, we actually recommend a little bit higher, a 6040 listing, a listings focused business. So it'll be, it'll actually come out at about 31, 32% and depending on how you pay your, your broker, maybe a little bit more than that. But generally you want to be between about 30 to 35% that you're paying to your broker and your salesforce. And that's where things need to end up. And you can have different splits for different lead sources. And it's, it's, it's an important part of what we teach at real estate B school. So, but you have to have an awareness about it. You don't just offer a split based on what other people are doing. You decide and predetermined. You begin with the end in mind where you want to end up.