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Is a Reciprocal Split and Share the Expenses Fair?

By: Suzi Gravenstuk
Tuesday, December 04, 2007 3:06 AM

One of my favorite places to bounce ideas around is at Active Rain Members Only Posts. Other than here, one other place I go to gauge positions regarding "hot" real estate topics is http://agentsonline.net .

Just as Discount, Traditional, Full Service, and Virtual Office will be hotly debated until the end of time--I expect Broker/Agent Topics and commission splits will be as well.

For Instance, the way I go about my business isn't for everyone. I am an independent Broker, licensed to work from home. During my year of required sales person apprenticing, the only time I went to the Broker's Office was to deliver a check, pick up signs, etc. I never met a client at the office. I also never worked floor time. With both brokers it seemed a bit like I was in the way when I did stop in.

Maybe its just me, but I see a permanent office as far less important than say, technology investments, etc. Research capabilities. I know there are others like me, I just need to find them.

Some agents will be lost without "floor time" and walk in traffic. Some, like me, are allergic to offices and would rather spend time developing leads than waiting for leads to walk in the door. I prefer working by appointment and endeavor to meet schedules of clients and/or customers.

Now to get to the point. I vowed to spend a year as a licensed broker--alone-- so I could investigate and think about different methods of business. That year is almost up. For 2008 I hope to find 1 to 3 licensed agents to work with in a partner type atmosphere.

I like working with clients in one on one relationships. I will not give that up. However, I do not feel that "competing with the broker" should be an issue, as I plan to try a reciprocal commission split. Basically, what that means is that as an agent, I will make the same commission as other agents and pay a split to the "brokerage". After Advertising and other joint expenses, the brokerage split less a $250-$300 transaction fee will be split among agents.

We each develop our own leads, and pay for our own supplies. When we lunch as a group, or attend functions as a group--we go dutch. "I am NOT Your Mama:-) . I believe agent partners should be treated as adults and truly as the Independent Contractors that they are. No Bottle Feeding, coaching and mentoring, training--yes. 

#1: I believe my model will appeal to those who are mature in the field, who have been used to paying their way for the most (classes, already setup technologically to operate from home)

#2: The model should also appeal to Agents who work trades aside from Real Estate. I will be happy to back my agents up.

#3: This model may appeal to those who no longer want to be active in the field, but would rather generate leads and/or back up field agents.

#4: Okay, agents--tell me what you like and don't like about this model. Obviously, it is still in development. As an LLC, Agents could also be voting members if they liked.

I had not planned to post this topic here until I read:  I Pay My Broker Too Much, by Dennis Jonas.

 

 

 

 

 

 

 

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Comments

John Rainville
Member Since '06

John Rainville said:

Suzi:

I've read and re-read your post.  I am trying to see what your USP is? Unique Selling Proposition.  What are you offering?  A better split? What? What are you offering that you feel is "better" than any of the other mousetraps out there?  It sounds to me that you are looking for partners to split your expenses and then pay you a "brokerage fee" for what?  What is in it for them?

December 4, 2007 8:13 AM
Shelly  Constantz
Member Since '07

Shelly Constantz said:

John, I had to read and re-read as well!!  I think what suzi is suggesting is that there is an entity "the brokerage" that all agents (including suzi) pay a split to.  The entity pays for advertising, expenses, etc... Any remainder is then split between all the members of the company.  Kind of a "profit sharing" if you will.  Suzi, is this what you mean?  

If so, let me give you my 2 cents.  It wouldn't really appeal to me.  If I feel that I am good enough to go with an independent, then I would want to keep more of my earned commission.  I would be concerned that not all the agents would be producing at my level and now I am splitting what could have been mine with them?  There are a lot of holes in the model... if you ask me.  (which you did).  JMHO.

Shelly

December 4, 2007 8:41 AM
Jay & Francy Thompson  REALTORS®
Member Since '05

Jay & Francy Thompson REALTORS® said:

Checking for understanding here...

If I work for you, a portion of my commission goes to the brokerage. After expenses/fees, what's left gets distributed to everyone equally.

Not a bad idea if everyone is contributing equally. But I don't see much chance of that. Sounds like a high probability that a few top producers could be sharing their comissions with some who contribute little to nothing. Great for those that do little, not so good for those that do more.

What am I missing?

December 4, 2007 10:18 AM
Suzi Gravenstuk
Member Since '06

Suzi Gravenstuk said:

You guys are great. The split will vary by what an agent wants to do and the value they bring. Some agents don't want to deal with anything administrative, some agents are better at adminstrative and would excel at promoting the team; believe it or not, there are some agents who excel at lead generation and aren't great at client nurturing.  

I should have waited to post.

My thoughts are 75 agent/25 brokerage or 80/20 depending on the assistance he or she needs. If they have their own assistant and never need adminstrative assistance and generate their own leads it could go 100% less a transaction fee to be determined.

Lead Generation would be compensated the same as a referral fee.

John, I will never be a hard-sell broker, and I am not looking to recruit many, just a few special agents that will see $ value from supporting each other and splitting costs. As you can tell, I am at the chalk board with an eraser in hand--I want to negotiate with agents, I want them to tell me what they want, what they feel they need, and see if we can come to agreement.

There are many mousetraps out there. I am not saying that I offer a better solution, but that I offer an option.

Shelly, You got the initial concept. There are holes and that is why I did ask all of you. "If I feel that I am good enough to go with an independent, then I would want to keep more of my earned commission." ...Net is what its all about:-) "I would be concerned that not all the agents would be producing at my level and now I am splitting what could have been mine with them?" ...That is always a valid concern. If an agent is an island and requires no assistance and no support from the team and opts out of the "profit sharing", I would consider a trasaction fee only, or an 85% to 90% split.

Jay and Francy, it also depends on how one views contribution. Is contribution valid only by the signatures at closing, or is contribution valid in backing up a top producer so that they don't have to worry about doing anything other than what they do best?

I agree there is a lot to be defined and discussed among interested agents. I have read quite a few Team blogs and agree that this point seems to be the major obstacle.

More later:-)

December 4, 2007 3:41 PM
Shelly  Constantz
Member Since '07

Shelly Constantz said:

Suzi, good for you for thinking hard!!  You will get some good answers here.. some you want and some hard ball answers.  But I am assuming that is what you want!!  Too many yes's and one of us isn't necessary : )  Good luck on your new path.

shelly

December 4, 2007 4:52 PM
John Rainville
Member Since '06

John Rainville said:

Suzi:

Thanks for the clarification.  Don't apologize for putting the idea out early---that takes more courage than most will EVER have!  And I agree with Shelly, the feedback and interaction and FREE expression of ideas here is WONDERFUL and would cost major money or time to get elsewhere.  The depth and breadth of the experience in this forum is phenomenal.  I'm still trying to wrap my head arouund your concept, it sounds like you are trying to do a high tech Mom and Pop where the agents get a warm and fuzzy feeling having you as their security blanket. Sort of like letting them have their own shop without all the "hassles".

Just remember, each one you bring on will take a "piece of you" everyday and there will be an impact on "your business" and you need to be sure you are prepared to take that on, and be compensated for each "piece" you give up.  

You will have to learn to have the "Broker Face" to show them when they are telling you about their "problem", all the while "Rome is burning in the background".

December 4, 2007 5:24 PM
Jackie Hawley
Member Since '05

Jackie Hawley said:

I worked for a small independent for 5 years. That broker did provide an office, but one she purchased for a good price and rehabbed at her expense. She was the one with ownership and made a nice profit when she sold it and moved locations.

What she did was take all her bills, including mortgage payment, advertising, equipment, etc. and divided it 7 ways (7 agents including the broker). My monthly nut to her was $625 and I kept 100% of the commission. We paid E&O per closing. Every year she re-evaluated her expenses and our monthly cost would go up or down accordingly.

Those who did not want to pay a monthly bill were on a 60-40 split. If she made more than $625/month off them- fine. She was also the one taking the risk. But it did work out well and everybody was happy.

If you want to talk to her, you can contact me privately and I will pass your number or email address on to her. She is a very nice person and I'm sure she would be happy to talk to you.

Jackie

December 4, 2007 7:02 PM
Suzi Gravenstuk
Member Since '06

Suzi Gravenstuk said:

Shelly, I went back and included a copy of my Cable One Ad which I think expresses my intent better than I did in my original post. The way I wrote, I am surprised I had any coments.

I appreciate you guys reading and giving me the ?What??? Clarity was definitely not there. I think it was amazing you guys dropped back by.

John, after I visited your website I understood where you are coming from. I certainly did not paint a very clear picture. Later today I had an opportunity to put a little more time into research and found a few Broker Co-op models to build on or around. I will also be seeking legal advice on using the LLC as a true LLC. One of the many reasons I wanted to attain broker licenseing was because even if I were at a hundred per cent, I was still advertising for and building someone else's business. By utilizing the LLC as an LLC, each licensee will have an opportunity to be part owner. (I still have to do tons more REsearch in that aspect).

John, your last comment is priceless and I will remember the points you bring up. The core idea is not a unique or breakthrough model. As Jackie pointed out she worked with an Independent Broker using a similar concept.

Most likely I expect that we will end up with several small "transaction" meet the client type offices--down the road. If you think of the Mississippi Gulf Coast, or even just Harrison County 1 office is more of an inconvenience than having none. No one has ever mentioned to me anything about me not having a brick and mortar office. Maybe its because I package myself with a tablet, portable printer, Verizon Broadband, etc. I have everything I need with me. Future LLC member/agents need to be similarly motivated. So, we can agree that MGC Realty, LLC will definitely not be for everyone. (We will be known by our tablets and taking technology to the client:-)

The warm fuzzy part, also psychology 101. Focus on what we do best.

Incidentally, out of the blue I had my first inquiry today before any ads ran. I don't think we will be a match; but the irony was there.

Good night and Thanks again to all of you.

December 5, 2007 2:07 AM

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Suzi Gravenstuk
MGC Realty, LLC

Suzi Gravenstuk
Member Since '06

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