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Every agent wants to make more money on their real estate transactions and the debate of the agent versus office commission split is never far from agent-to-agent conversations.
High commission splits and new agency models providing the opportunity for agents (and property managers) to retain high, even 100 per cent, splits have become more popular in recent years, and for good reason. We championed the trend over a decade ago and have been early adopters of what we saw as the natural evolution of the real estate practice.
Here’s why.
The value proposition offered to agents by the corner-store real estate office has been significantly diluted for over a decade and accelerated during the COVID-19 pandemic. We must remember that the traditional high-street frontage office has been around for over 100 years with little changing in that time. It has been like the “old guard” protecting the fortress from unwanted change; and we know what has happened to other industries when imminent change has been approaching and ignored — “extinction”.
Dramatic advances in technology have provided a platform for agents to operate in a much more efficient and affordable manner. All the tools available to only the “corporates” with deep pockets are now a fraction of the cost and now tailored to the small, agile and boutique operator. Brand recognition from the majors is no longer a “competitive advantage” as often touted to attract talent. In fact, good-performing agents are often “lost” in the sea of sameness and the rise of boutique branding is now the competitive edge. Yes, much to the resistance of the traditionalists, the competitive advantage is now with those agents who embrace boutique personal branding. Why? They can build hyper-local personal brand equity extremely quickly — which translates to more leads and greater GCI. Low-cost operational efficiencies and scalable, serviced office locations replace the need for the predominant high cost and investment requirement of the traditional high-street operations.
Most importantly, this is “consumer”-driven, not agent-driven, which is an often-overlooked fact. Just ask any agent who has contemplated a brand/office change and approached sellers if they would follow them. We all know there is overwhelming support from the selling community to follow the agent, not the office or corporate network. This further dilutes the value proposition of the high-street offering to agents and planting the seed for agents to explore high commission split options.
With all the above favouring the agent, it is understandable why agents are often questioning the agent versus office split they may currently be on. To make an informed decision, one must make a “value” and “what’s fair” analysis. At the end of the day, it will always fall back to perceived value, and that value will be quite different between one agent and agency to another. One agent may value the freedom of operating as a low-cost boutique agent retaining most of the commission, while another agent may crave the energy and tangible support provided by an in-house office team and therefore happy with a lower split in exchange. There is never a one-size-fits-all.
Commercial reality plays an integral part in the changing commission split landscape, and while even we are advocates of the agent being rewarded the lion’s share of the commission, “playing fair” is so much more than the monetary value each receives in the transaction — it must be a win-win and commercially viable for both parties. Principals must be aware of options available to agents and, vice versa, agents must acknowledge that the office principal is entitled to a fair return on investment, time and risk. The analysis is much more than just the money. It should be based on support, profitability and freedom. The perfect environment is when all three are in harmony.
On a final note. I would also caution those that have been lured by the prospect of 100 per cent commission splits; and especially for those who know me, I can make any Excel spreadsheet look sexy and make the numbers work, but as the saying goes, if it sounds too good to be true, it usually is. Always read the fine print.
Manos FIndikakis is the CEO and co-founder of Eview Group.
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