Like everybody else, estate agents work to fund their lives. To live our best lives, we must earn the highest possible income from our efforts. Property professionals, unlike doctors, for example, don't get paid unless they are successful. Regardless whether or not their diagnoses are correct, doctors still get their consultation fee. In contrast, if we don't sell our client's property successfully, we get no commission in our bank accounts.
On the other hand, even when you sell consistently, you will have costs of sales and expenses that reduce your gross commission income. Cost of sales is simply the money you have to spend to earn the income, for example franchise fees / royalty and the commission split you pay to your estate agency in terms of your agreement. You will also incur business expenses such as stationery costs, your business calls and salaries, if you appoint an assistant or two.
Although there are exciting new business models in the real estate industry, most estate agencies basically still offer some form of commission split or sharing arrangement to their agents. Some agents mistakenly only consider this commission split before making a decision to join a particular estate agency. Although the split with your company is certainly important, it's by no means the only important consideration.
So what are the important things you should be considering to earn enough to fund a life worth living? In no particular order, here are 5 questions you should be asking your estate agency to ensure you build a real estate business worth owning.
1. What is the commission split offered by your estate agency?
Most traditional estate agencies offer a simple 50/50-split to their agents. Depending on, say, your level of experience, they might even offer you a higher commission split, for example 60/40. Alternatively, you could get a higher split on a sliding scale, say 60/40, on every property you sell within a 12-month period after you've sold at least, say, 10 properties or R10 million property volume. There are stil many agencies in our country that offer some version of this commission split to their agents.
Because the estate agency takes a larger portion of the gross commission, they pay some of your business expenses, for example business cards, boards, online marketing costs and your annual fidelity fund certificate renewal costs. Some lower producing agents think this model makes sense because they don't have to pay these costs out of their own pockets. However, because a traditional agency continues to take its split out of all commissions, regardless of the number of sales, estate agents who produce at an even slightly higher level essentially get "penalised" for doing more sales. The more a higher producer in one of these agencies sell, the more that agency takes from the agent - without necessarily paying more of the business expenses of the higher producing agent.
At Keller Williams you will start on a very attractive 70/30 commission split. For example, if the gross commission income after royalties is R100,000 on a sale, you get to keep R70,000 (before income tax, of course). You pay yourself an increase of 40% just because you joined Keller Williams! If the Gross Commission Income (GCI) on your transactions is R400,00, you will increase your earnings by R80,000 by joining Keller Williams.
If you do, say, only 6 sales like this in a year, you will have to pay a traditional company R300,000 on a 50/50-split. Now, for those of you who are quick with your calculations, no, you will not therefore pay R180,000 to Keller Williams on your 70/30-split.
It gets even better than that!
2. Does your agency limit ("cap") the commission it takes from you?
Look, you will pay some of your commission to any estate agency. An estate agency is a business and like any other business it requires an income stream to pay its expenses and stay in business. In fact, even if you went into business on your own with your own agency, you are not going to receive all of the commission out of your transactions. Sure, as the business owner you will get all of the commissions, but you will also be responsible for all of the expenses of your business, which, arguably, still leaves you at a 50/50-split only! As a solo agent, you will further be responsible for all your own marketing, administration, legal and compliance matters, human resources and staffing matters, tax and accounting etc.
The question is, how much commission will you have to pay to your existing estate agency? Remember, you pay the agency portion to your agency on all or most of your transactions. The more you sell, the more you pay to your traditional agency. In a sense you get penalised by your agency for doing more sales!
Because the answer to the question in bold above isn't looking great for the estate agent in the traditional estate agency, a whole host of new estate agencies and property groups are offering high commission splits to agents. Many agents find this very attractive and are joining these high commission agencies in droves. Think about it, if your current agency only offers a 50/50-split, wouldn't you also seriously consider an agency that offers an 80/20-split to you?
But what if you sell consistently? Remember, even on a higher split to you, say 80/20, you still keep on paying 20% of all your commissions to your agency. Wouldn't it be great if there was a fixed limit on the amount you paid to your company.
We certainly thought so!
So, we mentioned that you start on a very attractive 70/30-split when you join Keller Williams. However, once you've reached an amount of R145,000 paid to us in any given year, everything else you earn that year is yours. You are then officially a "capper".
Let's use another example to illustrate this:
If you sell an average property at an average value of R1,500,000 at 6% commission, the gross commission income is R82,800 (after deduction of 8% royalty). With your 70/30-split, your portion thereof is R57,960 and the company portion is R24,846. After only 6 sales (5,8, to be precise) you have paid the cap amount (R145,000), and the commission on all your sales for the remainder of that year is yours alone. You have capped and now get to keep all your commission (after royalty) on all your sales for the rest of the year.
Put another way, if the gross commission income on your transactions is more than R483 334 in a year, you will cap at Keller Williams. To achieve this, you just need to sell 4 properties at just over R2m each, for example. Everything else you sell, you do it for you and your family alone.
But if you are with Keller Williams, you are never on your own.
3. Does your company offer a high commission split but low level of support?
Often the high commission agencies referred to above grow fast, at least initially. It's interesting, though, that a large number of property professionals subsequently leave these high commission agencies within a period of less than two years after joining.
Why is that?
A possible explanation may be found in the low level of support these agencies offer to their agents. It comes down to simple economics: if the agency gets only, say, 20% of the commission, there is a hard limit to what the agency can afford to provide to its agents in terms of support. In many instances these high commission agencies are little more than virtual agencies that provide agents with a logo and a website that links up with the major property portals to feed their listings to. To keep overheads as low as possible, they rarely offer much in terms of office space, equipment, support, leadership, technology and training to their agents. Agents with these agencies, for the most part, operate from their own home offices only. The agent's access to the principal is limited due to the fact that the principal is often located in another area on a regional or national basis.
In an attempt to overcome these challenges, some of the more established high commission agencies offer improved marketing benefits to their agents, for example by offering professional listing photo packages on a limited number of listings for a fixed fee. Some others offer benefits such as in-house training by well-known trainers or by the principal who visits the area from time to time.
So it's not completely unexpected that many estate agents who join these high commission agencies soon realise that the allure of higher commission splits is overshadowed by the relatively low level of support. Also, having to "go it alone" for the majority of your real estate career can be disheartening in the high-pressure real estate industry. Before long, many agents leave these agencies for the support, team spirit and culture offered by an established real estate office.
What if you could get the best of both worlds?
Keller Williams follows a high-volume, low-margin business model. As the largest real estate company in the world, we attract many estate agents and budding entrepreneurs.
When you join KW, you immediately get the benefit of the KW productivity solutions, as well as the best training available in the world (we even have the awards to prove it). KW associates become more, sell more and earn more.
Only a few years after entering the South African property industry, Keller Williams is already home to the fastest-growing team of property sales professionals in the country with almost 1,200 estate agents moving to KW. In other words, not only do you get the high split and the cap of R145,000 per year, you also get everything else! ￼
When you join us, you will be supported in your business by a full leadership and support group (consisting of an Operating Principal, Team Leader, Market Centre Administrator, Productivity Coach in many offices, Technology Ambassador and Director of First Impressions). You will get access to high-level property and business experience.
The typical Keller Williams Market Centre are attractive, well-equipped and ideally situated in their areas. You will get access to unparalleled property, business and personal development training, coaching and mentoring on all topics relevant to and at all levels of your real estate career. With access to a leadership group and a dedicated Productivity Coach, you will be able to shape your development and your real estate career to a much higher level.
As the largest real estate company in the world, Keller Williams is able to develop our own custom technology tools and software that are deeply tied into our models, systems and training. You will have access to many tools and technologies such as customer relationship management tools, marketing and advertising tools, pricing tools, mobile apps (Android and iOS) and more. All these tools, training, tech and support will increase your ability to earn an income from your real estate business.
But is there a way to diversify your income stream to include passive income?
4. Can you earn multiple streams of income at your current estate agency?
All estate agents have experienced the "real estate roller coaster" either personally or through another agent they know. That's when an agent sells nothing and therefore earns nothing for a month or two, just to receive commissions in the month thereafter. Unfortunately for many estate agents, this up-and-down cycle repeats itself regularly (and sometimes forever). Unless you get the right training and coaching to form the correct habits early in your property career, you might be trapped in this spinning hamster wheel throughout your career.
The KW Productivity Solution is aimed at providing you with a predictable source of income. So, Keller Williams associates sell property. Lots of it!
As is the case generally with the majority of people, many estate agents fail to provide sufficiently for their retirement. There is a well-known joke that estate agents never stop working; they just topple over someday while taking a listing. Luckily KW offers wonderful training, systems, support and accountability to ensure that you aren't that agent!
With our interdependent culture, Keller Williams associates are treated like stakeholders in the success of the company. When your stakeholders help you to grow the company, they get rewarded of course. We firmly believe that's how business partners should treat each other. This is how the concept of growth share was born.
Check out the video below for more information about this fantastic way to earn a passive income while helping to build Keller Williams into the dominant estate agency in South Africa.
5. Are you asking the right questions?
What's next for you?
Are you doing the best you possibly can for yourself and your family?
Do you know everything you need to know to make an informed decision about the company where you will build your real estate business?
Are you ready to earn more from your real estate business?
If you have any questions about the direction and future of your real estate career, why don't you pop in for a quick business consultation with one of our experienced, well-trained and friendly real estate business consultants? There will be no pressure, just good coffee and someone who knows what you are currently experiencing in your career.
We all started our careers somewhere or doing something else. As the largest real estate group in the world, any member of the leadership group of our market centres has a wealth of experience in real estate.
We'd love to help.
For more information, schedule a quick business consultation with one of our leaders (after the click).