The real estate industry before 1978
The real estate brokerages were mostly national and international franchises that offer to train new agents and share 50% of the commission earned by a new agent. Agents who were in the business longer and achieving certain sales volume were paid a higher split. The top producers in the brokerage could keep up to 90% of their real estate commission.
The second wave
The 100% commission brokerages like RE/MAX (since 1978) and Sutton (since 1981) offered a much more attractive deal to the agents compared to the national franchises. The agents who left these traditional franchises were allowed to keep 100% of their commission, but they had to pay a monthly fee from $400 to $800 to be associated with Sutton and RE/MAX.
Within about 10 years, the transformation from split commission arrangement was almost complete. Today, all national real estate franchises follow the system of the 100% brokerages. They charge a monthly fee to cover expenses for admin, desk, franchise, etc. For new agents who join them, they have to sign a contract whereby they are trained by the brokerages and they also pay 25% of their commission to the brokerages.
The third wave?
Read the next segment… the impact of internet on the real estate business and the third wave that will change how the business is done.
Note: We welcome any feedback on any info here that are deemed in-accurate and need revision. The author is a Strategic Partner of Team 300o Realty
