If you’ve seen all those smiling faces of realtors on benches you may have thought to yourself ‘I could do that’. You may even have started searching for ‘real estate franchise opportunities‘, but before you jump in you should understand how money is made in this industry which we’ll break down in this guide.

What can you Earn From Commission?

Whether you’re looking to run a real estate franchise yourself, or work within one, it’s important to know how you’ll make your money and how much you can expect to make in your first year if you’re looking to leave a job for this new opportunity.

Firstly, it’s important to remember that as with any commission-based income there’s no guarantees. People always want to sell and buy properties but there will be periods where it is quieter depending on housing prices and how the economy is coping.

Once the deal is closed, commission is paid and split between the listing and buying agencies. The exact amount will differ based on state but typically commission is around 6% of the sale price. So, assuming a sale price of $400,000 that’s $24,000 that’s split between the two sides, so $12,000 for each broker.

As a broker, you’ll split this $12,000 commission with the selling agent. We’ll go into commission structures next, but typically if your agent is new, you’ll be paying them around 50% of that commission, up to 80 or even 90% if the agent is at the top of the pyramid at the office and closing countless deals.

Using that $12,000 example this is $6,000 for the new agent and up to $10,800 for the top agent, and fees will be taken off these figures.

If you’re a new agent, an average amount of deals to close is 4 in the first year but of course this can vary. Assuming $6,000 commission per sale as above, that’s $24,000 commission in your first 12 months. Note though that fees will be taken off this amount which we’ll look into further into this guide.

What Typical Commission Structures Mean for you

A traditional percentage split between broker and agent as we’ve described above is the most commonly used commission structure in real estate. This way, more sales are rewarded with a higher percentage so agents’ hard work is encouraged.

There are other options though including:

• Flat Fee: You’ll keep most of the commission from each sale and pay your broker a set fee, usually around $1000. This model works well for independent agents who consistently sell high value properties.
• Tiered Splits: This is similar to a standard percentage split as we mentioned above but your share will increase in increments when you hit certain milestones agreed in advance which can be a good model for new agents who are looking to move up.
• Team Splits: Sometimes, a team leader will receive a share as well as the broker. This means you get a little less but there’s also more support from the supervisor so this model can work well for new agents looking to build their skills with guidance. Usually in this model if you found the lead yourself, you’ll receive a higher percentage so once you become more independent, you’ll see the progress in your bank account.

What Costs you Will Have to pay

We mentioned above that you’ll need to pay fees from your commission. These are essentially costs that the brokerage incurs in the process of completing your sales, particularly in marketing your services (those benches we mentioned earlier for example).

Depending on your brokerage not all costs are included in the fees you pay from commission. Before signing with an agency find out if you need to additionally pay:

• Desk Fees: These can be up to $15,000 a year in high value areas like LA.
• Tech & Marketing Fees: These can range from a few hundred dollars up to around $2,000 and tend to be charged monthly.
• Lead Generation Expenses: These could be more than $1,000 per lead in high volume areas.

What to Look for in a Brokerage

We’ve talked a lot about money here but it’s not everything. Knowing your commission rates and what fees you’re responsible for upfront is important but you should also consider:

• Will you Have the Support you Need?: Ask about whether there’s a mentor program and if there’s any help finding leads in your first few months. You deserve the chance to grow.
• Is There an Opportunity to Grow: Once that support has paid off, can you move up in the company? This could mean becoming more independent with leads or taking on a team leader role.

How to Find Real Estate Franchise Opportunities

If you’d rather be a broker and have agents working for you, have you considered opening your own real estate franchise? At Guerilla Franchising, we will match you with the right options so you can thrive straight away. Book a free consultation today.

Disclaimer: All figures, costs, and estimates provided in this article are for illustrative and general informational purposes only. Actual amounts may vary significantly depending on location, brand, market conditions, and individual franchise or brokerage agreements.