Math plays a crucial role in the real estate industry, and it is essential for REALTORS® to have a strong foundation in mathematical concepts. REALTORS® need to be able to accurately calculate property values, estimate mortgage payments, analyze market trends, and negotiate deals. Additionally, math skills are vital for creating and interpreting graphs, charts, and other visual aids that help clients understand market conditions and make informed decisions. Without a solid understanding of math, REALTORS® may struggle to accurately assess the value of properties, make sound financial decisions, and ultimately succeed in the highly competitive real estate industry.
Additionally, mathematics plays a crucial role for REALTORS® when selecting a brokerage. It is important to consider the commission structure, which typically involves percentages, and do the math to determine potential earnings. REALTORS® should also understand potential brokerage perks such as CAPs, the need to split the Bonus To Selling Agent (BTSA), Revenue Share, and whether the brokerage offers shares in the company. In addition, it is wise to understand the costs associated with joining the brokerage, how much are E&O fees, annual fees, monthly fees, and technology fees. A solid understanding of math is essential for REALTORS® to make informed decisions about which brokerage is the best fit for their career goals and financial needs.
Frequently, I have conversations with REALTORS® regarding their current compensation plan and whether they are with the right brokerage that aligns with their business objectives, needs, and wants. These conversations can be enlightening as I have found that many REALTORS® fail to consider all the relevant factors or do not fully comprehend the math involved when it comes to their compensation plan. It is surprising that the real estate industry seems to be the only industry where people choose to work primarily based on the organization's community, collaboration, culture, support, and training, while math is a core component. Surveys show that when it comes to what REALTORS® want from a brokerage, compensation plans typically rank third in importance, which is an interesting trend to observe.
I can’t help but draw a comparison between the real estate industry and my previous Corporate America days in regards to this intriguing phenomenon. In those days, when people submitted resumes for a job, we primarily focused on two things: #1 How much was the salary being offered, and #2 Where was the job located? Fast forward to today, post-pandemic, and things haven’t changed much: #1 How much is salary being offered, and #2 Can I work from home? Outside of the real estate industry, nobody cares about their job providing a community, collaboration, and connecting with people at work. I have friends! How much money am I being paid? What are my benefits? Will you match my 401k contribution? How long is my vacation? Math & Money Matters!
Flat Fee vs. Splits
The real estate industry provides several options when it comes to compensation plans. From Flat Fee to Splits, REALTORS® have the free-will to choose the Brokerage and Compensation Plan that they believe is best for them. Recently, more Flat Fee Brokerages are now competing and offering just as much value to their Agents as Traditional Brokerages who have historically charged splits. Now, Agents have the option to pay a Brokerage a transaction fee, and keep much more of the commission and still receive the community, collaboration, culture, support, and training they need and want. Especially when the market is transitioning like we are currently experiencing.
At DOSS, we understand that a standardized compensation plan doesn't fit every agent's needs, especially when considering the various stages of their real estate journey. Therefore, we offer a variety of compensation plans to choose from, including both Flat Fee and Splits. Our Flat Fee compensation plan includes a $75 Monthly Fee, $395 Transaction Fee, a $45 E&O Fee, and a $10,000 Cap. On the other hand, our Split compensation plan has no monthly fee, an 80/20 split, a $45 E&O Fee, and a $10,000 Cap. Regardless of the chosen plan, our agents will have access to our full suite of tech-tools to help them succeed. Math and Money Matters!
High Caps vs. Low Caps
As the real estate industry grew more competitive, brokerages began offering incentives to attract and retain agents. One such incentive is the commission cap. With this approach, the brokerage sets a limit on the commission an agent owes them for the year. After the agent reaches the cap by paying a portion of their commission to the brokerage, they keep 100% of their earnings for the rest of the year, except for a few minor transaction fees. However, commission caps can vary greatly depending on the brokerage, ranging from $10,000 to over $20,000. Unfortunately, many agents never reach their cap, and end up working at a brokerage with a high cap and an unfavorable split, hoping to achieve a seemingly unattainable milestone.
At DOSS, our top priority is to help REALTORS® succeed and achieve their financial goals. To achieve this, we have set our commission cap for Agents at a low $10,000. We believe that having many Agents hit their cap is more beneficial to the culture of our organization than just a few who experience this annual accomplishment. Our flat fee and split compensation plans both feature this low cap, which enables our agents to keep their expenses low while boosting their bottom line. Math and Money Matters!
Half-Caps vs. Fixed Caps
When it comes to teams, particularly those with over 10 agents, their commission caps can easily reach six figures. I know of several teams paying over $200,000 annually to cap. What's interesting is that most of these teams use very little support, technology, and tools provided by the sponsoring brokerage. So, why are they willing to pay such high fees if they don't use any of the services? The real estate industry often uses the cliché "you get what you pay for," yet these teams are paying hundreds of thousands of dollars for systems they don't even utilize. Furthermore, most teams purchase their own technology and systems, so why are they paying so much to house their agents?
At DOSS, we have conducted extensive research to better understand this phenomenon and the broken perception that surrounds it. One of the major obstacles is the pain point of transitioning to a more favorable compensation system that could significantly reduce annual costs, monies that could be reallocated to boost their revenues. DOSS has surveyed and researched teams and identified a solution - a Fixed Cap. This plan has no minimum premiums to qualify for a team, no limitations on the maximum agent headcount, and an overall team cap of $50,000. Whether a team has 10 or 100 agents, their cap remains at $50,000. To sweeten the deal, teams only pay a $495 transaction fee, plus a $45 E&O fee per transaction. This means that even as they strive to reach their cap, they still have the opportunity to earn 100% of the commission, minus a transaction fee. At DOSS, we strive to provide our agents with the most advantageous compensation plans and help them maximize their earnings. Math and Money Matters!
Offering a 1% Rebate vs. Paying a 35% Referral Fee
The word “rebate” tends to make REALTORS® blood boil. Yet, they all do it: privately and publicly! Why? Because commissions are negotiable, and there will always be a situation where the Agent either is being paid less because the Listing Agent stated that the seller is only paying them 2% or 2.5%, or they have to help their homebuyer because they need assistance for the deal to close. And, if you don’t help them, what does that say about you? Either way, it’s less than 3%, which by industry standards means you are a Discount Agent/Broker.
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One day, I sat down and did the math: 1% Rebate vs. 35% Referral Fee. Do you know that paying a 35% referral fee to OpCity or any of these lead sites is more expensive than simply giving buyers a 1% Rebate and being in more control of your business? Yes, I get it... You are paying a referral fee for clients that you otherwise wouldn't have if they were not referred to you. But, instead of being totally codependent on these lead sites, what if you marketed a 1% Rebate directly to consumers and created your own funnel of business. Or, what if you did both! Lets look at it here:
EXAMPLE: 1% Rebate
Sales Price $400,000
Commission(3%) $12,000
1% Rebate $4,000
2% to Broker $8,000
*Then your compensation(Flat Fee or Split) with the Brokerage
EXAMPLE: 35% Referral Fee
Sales Price $400,000
Commission(3%) $12,000
35% Referral Fee $4,200
Remaining to Agent $7,800
*Then your compensation(Flat Fee or Split) with the Brokerage
The million dollar question is, does it really matter who receives a portion the commission? Is it better to offer a 1% rebate to your client or pay a referral company a 35% referral fee? Ultimately, both are expenses of running a business. Instead of taking control of our businesses and promoting a service that’s mutually beneficial to both the agent and their clients, as an industry we seem to be more concerned about the opinions of other Agents, as though they are the ones paying our bills and putting food on our tables.
At DOSS, we believe that Math and Money Matters, and that's why we strive to provide our agents with the best compensation plans to meet their unique needs. Compensation plans, that empowers them to be flexible when necessary to win and close more deals.As the real estate industry continues to compress, we believe it's imperative to support our agents by helping them to lower their cost, increase their revenue, help more people, have more fun, and make more money!
