“Real Estate Myths ” 50/50 Split
Today’s article is especially for those Realtors® who have some misunderstandings about 50/50 split model in Real Estate industry. In reality it’s not a 50/50 split, it’s an expense sharing system which is a win-win situation for Realtors® who work in a team model.
First let’s talk about why we should join a team model rather than being an independent Realtor®. The simple logic, which is proven by stats as well, is that as an Independent Realtor® the success rate in the Real Estate industry is only 10% where as the success rate of Realtors® is 90% in team models.
Now comes the question of justification of 50/50 split. To understand this better we have to analyze the expenses of independent Realtors®.
Let’s take an example of a Realtor® who is making approx $200,000 GCI and doing 20 transactions (10 Listings and 10 Buying’s) in a year. The same formula will apply for more or less income.
Brokerage Split (Based on average 10%) = $20,000
Fixed Yearly Fees & other expenses of Brokerage (@ Monthly Fees $300 + Room/Desk & Misc Expenses) = $5,000
Sign Installations, VT, Lock Box and Misc Listing Expenses (10 Listings) = $3,000
Staging Expenses (10 Listings, Avg. staging cost $2,000) = $20,000
Ad Expenses for Listing and Buying (Flyers, Newspapers, Radio, Magazines, etc. Industry Standard 20% of sales) = $40,000
Mentorship Expenses (Based on your work with a senior agent in your office who will charge 25% for his/her services) = $50,000
Misc Expenses (Client Reimbursements etc) = $5,000
Total Expenses for $200,000 GCI = $143,000
Net in Hand = $57,000
Effective Net % Split: 28.5% / 71.5%
Now Realtors® will come with their own logic and will say that they don’t pay 10% split to their Brokerage. That’s fine but that’s what you get there. At the name of support there is nothing. Just think how many times you have visited your Brokerage or sat down with your Broker of Record, Team Leader or Mentor to plan your career. I am sure your answer is none. You get what you choose.
Another logic, “I don’t go to office and don’t have a room expense and monthly fees”. Just imagine how productive you can be if you are in a working atmosphere on a daily basis. Don’t you think your production can be manifold if you just have a right working atmosphere?
Another logic, “I don’t work with sellers or even if I do Listings, no staging is required”. It means you don’t understand the value of services to your clients and avoid enhancement of services to save expenses. You will be out of the market soon as someone else will provide better service and take over your business. You have to list to last. Most of the buying Realtors® start declining in their performance within 5 yrs.
Another logic, “I don’t spend money on ads to generate my business and work only on referrals”. I am sure you might not even realize that even for referrals you have to spend money and also for how long you will run your business on referrals. Ads are must to sustain long term in business. I have seen many Realtors® vanishing from market because of their wrong concept of business. If you have a theory of saving money to make money, you can just save 10% of your total income where spending money on business is an investment and you have unlimited potential of making money.
Another logic, “I never used a mentor so why should I consider 25% expense for mentorship”. I wish, whoever thinks like this, should have tried working with a right mentor and your GCI would not be on a level of $200,000. You would have crossed $400,000 mark by today or would have been a Team Leader or Mentor. You might have been progressing on a career path of growth to become an entrepreneur rather than just being a Realtor® for your whole life and out of the vicious cycle of yourself dependent business. Did you ever realize that your business as a Realtor® is totally dependent upon you? If you are out, your business is done. That’s the beauty of working in a system that is not dependent upon one individual. Once you build the system, it will keep working for you irrespective of your presence in the system, and that’s what we do at Save Max. We don’t just hire the Realtors®, we build system for them to become entrepreneurs.
Just imagine if you do additional 5 deals in a year with your mentor support or the leads which you will be getting in a Team system, you are automatically beneficial and will generate more than an additional $50,000 GCI.
Above all there is always a working atmosphere and motivation because of the team environment. It’s very important to pick the right team and a good mentor who has his own vision of growth and success. Just think, if you chose a mentor who couldn’t achieve anything more than becoming a team leader in a decade, he/she will only make you a good Realtor®. Choose a mentor who has crossed that barrier and made his team members either Mentors or Entrepreneurs. You will find unlimited potential there.
In a Team structure, which is suitable for all kind of Realtors® whether they are new, been working as a successful Realtors®, or making above $500,000 GCI, there is always a potential to grow. Above all your are not worried about your expenses and initial investment of ads, staging’s, signage’s and so on. Also, there is always economies of scale in the expenses as you are playing in volumes and always negotiate the deals with your vendors to best utilize your dollars and use the extra money to further enhance your business.
Now choice is yours – you can either keep consoling yourself by giving logics to yourself and keep working on a traditional system of Brokerage to wait to go out of the market in few years, or come out of your comfort zone to explore something which is unique, novel and be up to date to build a system for you to stay long in the market.
*** Don’t just be a Realtor®, Be an Entrepreneur ***
I will talk more about the benefits of Incorporating your business as a Realtor®, which is one of the best ways to utilize your tax dollars to enhance your business.
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