Most real estate professionals expect their brokerage firms’ commission allocations to remain unchanged for some time. As for others, many disagree about the changes that are coming.
This report is available to subscribers only Inman Intelis the data and research arm of Inman, providing insights and market intelligence into the residential real estate and proptech businesses. Subscribe now.
Commission allocations are about to change at some brokerage firms, but it may not be the kind brokers are most worried about, according to the latest Inman Intel Index survey.
about Four out of five agents and brokers Intel’s investigation in late May suggested that their brokerage firms’ commission allocations may constant within the next 12 months.
But among those who do expect the split to change, agents who believe their split will decline The ratio is close to 5 to 1 Those who believe it will rise.
The results reveal underlying anxiety among brokers that the upheaval sparked by commission lawsuits could hit their bottom lines in two ways: a drop in overall buyer commissions due to new policies, and brokers’ attempts to reduce remaining commissions. part of the profit.
Fortunately for them, some of these concerns may be unfounded, an analysis from Intel suggests.
Brokers told Intel they have little leeway to reduce agents’ cut of deals as their companies struggle to retain talent in a cutthroat hiring environment.
Intel’s latest survey confirms what these brokers suspected: Brokers who now try to cut agency cuts will face significant headwinds. Most brokers surveyed said a reduction in their cut would prompt them to leave the brokerage.
Still, brokerage leaders are focused on change, hoping to protect margins while maintaining recruitment and retention advantages.
They shared their actual plans, which are available to Intel subscribers in the full report.
expectation gap
Generally speaking, most agents and brokers agree: Don’t expect your split to change anytime soon.
But the Intel Index survey results did produce a huge difference between agent and broker expectations:
- less than 2% Agents surveyed believe their brokerage may Increase agency commission Next year’s commission allocation.
- But the survey found that a large portion of brokerage leaders are actually considering it. Percentage of brokerage firms that tell Intel they are a leader tend to increase The agent’s cut is 13%.
What causes this expectation gap?
Intel asked brokers looking to increase prices what is driving their growth. Perhaps predictably, they are under pressure to retain talent in this market in the face of cutthroat competition.
- Finished 53% of brokerage leaders told Intel they want Increase proxy segmentation stated that their main motivation for the coming year was “Recruit or retain”.
- Instead, brokerage leaders Plans to cut agency splits — A most of respondents said their plans were driven by Post-Litigation Committee Environment or expected market conditions.
Intel’s survey of brokers found that brokerage leaders have a more or less accurate picture of brokers’ mindset on this.
Top-performing brokers have received frequent recruiting inquiries from other firms, and most told Intel that their own brokerage firms’ move to reduce dividends could be enough to push them over the cliff.
- 64% number of agents traditional schism More than 90 Says anything less than that could prompt them to leave the brokerage. 69% number of agents traditional schism Between 80% and 89% Say so too.
- At lower levels, agents are less likely to consider the idea of split reduction. 79% of agents and traditional schism 1970s Indicating anything less than that will prompt them to look elsewhere.
So lowering dividends at this time could pose considerable risks to brokerage leaders who are already worried about retention issues.
Still, industry professionals expect a small number of brokerage firms to see their agency cuts cut as their leaders try to combat margin-squeezing factors.
- While roughly twice as many brokerage leaders favored step raises for agents, slightly less 8% of leader respondents indicated that disagreements among agents may be decreasing.
For the vast majority of brokerage leaders surveyed – 79% ——At least for now, there is no consideration to change the splitting method.
Instead, they shared some more creative steps they might take to improve profit margins while keeping the company attractive to agents.
way forward
As part of this question, Intel asked brokerage leaders if they were considering unfiltered ideas for changes to their compensation structures or business models.
Intel received 156 written responses to this question from brokerage leaders. Here are some highlights.
- “Consider alternatives to lower monthly fees with higher transaction-related costs/fees. This will add flexibility for new agents and those struggling to gain sales momentum in the current environment.
- “No. We are fixed price and our customers love it”
- “A salary of $25,000 per year will be provided”
- “Reduce wages, increase bonuses”
- “More ancillary service fees.”
- “I will no longer pay for marketing and lead generation.”
- “Increase the cap.”
- “Free Buyer Representative”
- “I will be emailing a comp disclosure to every agent showing prospective properties. Other than that, very little has changed.
- “Consider hiring a lead generation team and charging agents a percentage for pre-qualifying qualified leads.”
- “My compensation is the best I have ever seen, no matter what is offered. However, I am constantly being compared to used competitors on a “split” or “ceiling” level [calculus] Commissions are calculated, so that’s a little frustrating…I refuse to lie to my salespeople, so that’s my biggest frustration with the compensation model is that honesty and candor is a disadvantage in the marketplace because Real estate agents are not good at math.
- “Yes, we are considering reducing the agent share to increase profits.”
- “Consider increasing the agent share and making some agent-provided resources available on a usage basis.”
- “We may hire a full-time listing agent to focus solely on sellers.”
- “I am considering becoming a team (rather than continuing to be a small brokerage) because given the deregulation of real estate following the NAR settlement, it will be harder for small brokerages to compete with monopoly brokerages because they will be doing OTC or large brokerages The company will pay its own buyer’s agent a higher commission.
- “Business diversification, focusing on top talent, luxury residences, business and investment legends”
- “Give them what they want, or the remaining agents will leave. Many have been bought by competitors.”
Methodological Notes: Inman of the month Intel index poll The survey was conducted from May 20 to June 2, 2024, and 960 responses were received. The entire Inman reader community is invited to participate, and rotating, randomly selected community members are prompted via email to participate.. Users answered a series of questions related to their self-identified real estate industry—including real estate agents, brokerage leaders, lenders, and proptech entrepreneurs. Results reflect the opinions of the participating Inman community, which may not always align with the opinions of the broader real estate industry. this poll Do this once a month.
Email Daniel Houston
