There is no one-size-fits-all when it comes to team compensation. An experienced team leader outlines the pros and cons of the most common structures.
When I began considering forming a team, one of the first questions I encountered was how I planned to structure the commissions for team members. I quickly learned there is not a one-size-fits-all solution. The fair compensation for a team of three will be different than that of a large group.
Teams continue to grow in popularity for many reasons. In a recent article by NAR, CEO Bob Goldberg states, “Real estate teams are an increasingly popular business model in response to consumer demand for a wide range of specialties from their Realtor.”
The constant change in the landscape of real estate has caused fair compensation structures to change. There’s now a need for both specialty and general positions on a team, which creates different compensation structures.
A showing agent earns differently than a listing agent, and a general agent usually makes less than one who specializes. The full depth of compensation agreements depends on the size and needs of the team.
Here are some of the more common structures:
Each team member has a specific split amount and remains at that amount for one year. The most common set split among teams is a 50 percent split, plus a transaction fee. In exchange for the 50 percent fee split, the team pays for and provides a certain amount of leads, processes, mentorship and some administrative support.
Pros: There is minimal overhead for the team member, and the team gives a sense of belonging. Best practices streamline processes, and administrative support frees up the agent to do what they do best: create relationships and broaden their sphere for the creation of more business.
Cons: If you are not part of a strong team that provides leadership, support, goals and detailed processes, you may find it difficult to thrive and grow.
Sharing commissions equally
Each member equally shares the commission on all closed sales. They also share equally in all expenses. Because all team members are responsible for the files from contract to close, there is familiarity with the transactions. Sharing data enables them to cover each other seamlessly during absences.
Pros: New agents can share tasks, learn together and encourage each other to succeed. Because expenses are shared equally, this allows for a larger advertising budget from the start, which can jump-start the recognition of a team brand.
Cons: If you have a slacker on your team, you’re going to be frustrated. This model only works if everyone is giving 100 percent and able to bring in and close business.
Team members begin with a small split and increase split percentages based on closed sales. Graduated commissions are often similar to the brokerage structure but on a team level.
Pros: Team members have better control of their business earnings while remaining part of a team and still enjoying the team offerings of leads, support and processes.
Cons: Some team members feel left behind when they have a hard time hitting goals that result in increased commission. Also, some team members are less likely to mentor if they think a newer agent is slowing them down.
Will this model be the only one in the future? With recent lawsuits challenging the independent contractor status of agents, it’s possible, but not probable. Because the independent contractor model of a real estate agent is unique, it creates a slippery slope. After all, brokers do have some supervisory control over their agents.
Pros: Team members have stability by receiving paychecks regularly and usually can increase their salary through bonus and benefits programs.
Cons: The team becomes the employer and has control over the team members’ responsibilities. Team members are employees at-will and can be terminated or quit, just like any other employee.
Starting salary transitioning to commission
New agents begin with a small salary and the ability to learn hands-on by performing work as an admin or showing assistant. As their learning progresses, their responsibilities progress, and they transition slowly from salary plus bonus to full commission.
Pros: The new agent gets hands-on experience while still earning income.
Cons: The salary can be unmotivating for some who don’t care to make it to full commission status.
Which structure is most fair for you? Only you can answer that question.