Ownership stakes, high commissions characterize firms: 100% commissions more common

Increasing demand for bottom-line productivity has more and more residential real-estate offices going toward the 100 percent commission structure, industry observers say.
At Re/Max Optimum Group in Greeley, agents take 100 percent of their commission home. They pay about $25,000 for fees broken into two categories: "desk fee" and "shared expenses." The agents pay for use of everything from their desk and a shared receptionist to advertising, office supplies and long-distance phone calls. Conference rooms are available for agent/customer use.
Ron Kohl, owner/broker for Re/Max Optimum Group, said that the real-estate office of the future will be further slimmed down.
"Most agents will be working out of their homes or car," Kohl said. "I have 30 percent of my agents doing that now. This is not a place to sit and drink coffee. It˜s all in the productivity that the customer wants." The average Re/Max agent sells between 20 to 25 houses a year, he said.
At The Group Inc. in Fort Collins, "agent-ownership" of the company is emphasized. Most agents are owners, and sales associates are offered the opportunity to buy equal shares of the company, up to 4,500 shares. It takes about two years to buy your stock, said Larry Kendall, chairman of The Group.
Agents at The Group also have to cover their "fair share" of the expenses; a fee determined by the management team each year in November.
Fair share is something like a desk fee but different in that a complete package of services is offered in one fee. This includes contacts, long-distance phone calls, signs, advertisements and the computerized database of listings.
The Group˜s fair-share fee last year was $30,500 per agent. Most agents chose to pay the fair share through a 50/50 split in commission. They receive 100 percent of their commission once the fair share is paid.
A third fee paid by the shareholders is a 3 percent ownership deduction off the top of commissions. The money can be used for community-outreach programs, may be distributed in equal amounts to each licensee, remain in the company˜s reserves or used for additional support services not covered by other fees.
The 100 percent commission structure is also used at Metro Brokers of Longmont. Commissions can be negotiated individually, owner Joe Pollard said, but all of his people are on 100 percent commission. Some of his people want to work from home, coming into the office only to use the copier or conference room, he said.
"We don˜t have people tied up in sales and management," he said. "I˜ve been in the business since 1964. You get to where you don˜t want to be managed or to manage. You just want to answer to the commission."
He, too, believes that 100 percent commission is the wave of the future. In Pollard˜s opinion, real-estate agents need less hand-holding than they used to. Real-estate schools˜ costs are up, and the industry is becoming a little more sophisticated.
You can still find offices to give you that "pat on the back," but "how complicated is it, really, to buy a house?" Pollard said. "The main thing you have to have is the ability to negotiate."
Traditional methods work better at Century 21 Sherwood Realty in Longmont. Training is emphasized, because with the average real-estate agent making less than $10,000 a year, the nature of this business is that people leave, owner Don Sherwood said.
"Ninety-three percent of the business is done by 3 percent of the agents," he said. With this in mind, Sherwood˜s office puts emphasis on support for new agents.
Sherwood offers three different commission structures based on the agents˜ experience.
In the first, the agent signs an agreement and the level of service provided is negotiated. The agent pays a flat fee for office support, as much as $1,500 a month, and takes 100 percent commission. Sherwood said he doesn˜t sign on anyone at 100 percent unless they can show that structure works for them.
The second commission structure is typically used for new agents.
"The first year, I want agents in the office, the second year, they can work it from home," Sherwood said.
He or she starts with a 50/50 commission split. The percentage of commission the agent is allowed to keep gets larger depending on how well they sell. If the new agent sold 25 units in 12 months, they would be up to an 80/20 split. An eight-week training program that includes how to make a presentation, prospecting, buyer interviews and closings is required for new agents.
The third commission structure is fixing the rate; 65/35 is common. Agents on a negotiated commission split are charged a $250 desk fee during months when they have no sales. Part-time workers, who expect to make only 15 sells a year, favor this model.
Residential real estate sales are steadier work, but commercial real estate can be more profitable. At Blackfox Commercial Real Estate Group, in Fort Collins, most agents are also owners. There are no desk fees, and agents start at a 60/40 commission.
For enterprising agents, the split can increase to a 90/10 in the first year. After a two-year probation period, the agent can become a partner in the company, and receives whatever split they˜ve worked up to as well as profit sharing at year˜s end.
Russ McCahan, managing member/broker of Blackfox, said the system is designed to promote learning.
"We all work on each other˜s projects," he said. "The other way (in residential real estate offices) you just end up sharing offices."
At Realtec Commercial Real Estate in Fort Collins, agents consider their company a business association, said Steve Stansfield, president and broker. Each month, the five-man operation splits expenses in as many ways, collects 100 percent of their commission, and share support staff. Any agent needing additional assistance can hire personnel. The other four agents give input about the new employee.
"One of our common philosophies is "keep it simple," Stansfield said.