Posted
December 15, 2023

The Future of Commission Splits: Predictions and Adaptation Strategies

Brokerage

One aspect that plays a pivotal role in an agent's financial success is commission splits. When partnering with a new brokerage, one of the more significant questions is: What is the commission structure? This is an essential question, but it is often discussed in a rather hushed manner. It is also important to remember that the structure can vary from one brokerage to the next, based on performance or similar. 

The average seller commission layout ranges from 5-6% of the sales price. Typically, it's an even split between the buyer and seller agents, but this could vary as well. From there, is the commission structure within the brokerage. A few common broker-agent splits can be 80/20, 70/30, or 60/40 and there are even brokerages who do not necessarily participate in a brokerage split, but instead require transaction and FMLS fees only. Larger broker percentages in splits are generally more popular in dynamics where the agent is new, and they are partnered with a brokerage that is support and training-heavy. 100% commission structures are generally popular among more seasoned agents, they may require less brokerage support. All in all, it's important to remember that the specifics of a commission structure among a brokerage boils down to multiple factors and can vary across the roster, especially if it has a tiered structure. 

As the market continues to change and aspects continue to evolve, including the real estate commission model, real estate professionals must anticipate changes in commission structures and devise effective adaptation strategies. We will take a look at predictions for the future of commission splits and offer valuable insights into strategies agents can employ to stay ahead in an ever-changing market.

Technological Advancements and Commission Splits: The integration of technology into the real estate industry has been transformative, and this trend is expected to impact commission splits in the future. It is suggested that brokerages leveraging advanced tools and artificial intelligence may alter traditional commission models. This is key knowledge for agents and motivation to keep the advancing technological trends top of mind and consider aligning themselves with brokerages at the forefront of innovation to maintain a competitive edge.

Consumer Expectations and Commission Structures: As consumer expectations evolve, there may be a shift in how commission structures are perceived. Buyers and sellers are becoming increasingly savvy, and they may question traditional commission models. Agents need to be prepared to communicate the value they provide and explore alternative commission arrangements that resonate with changing consumer preferences. One suggestion is to find ways to increase the value of the services being offered as an agent. This could require an element of creativity.

Hybrid Models and Flexible Commission Structures: A potential future trend involves the emergence of hybrid commission models, offering agents greater flexibility. This might include a combination of traditional commission structures and performance-based incentives. While this model may emerge more and become a staple among more brokerages, the performance-based model is currently present through affiliate programs in many brokerages. Agents should be open to negotiating personalized commission agreements that align with their unique strengths and the needs of their clients. Agents should also keep this information at the forefront when considering a brokerage for partnership and support.

The Impact of Economic Conditions on Commission Splits: Economic conditions play a significant role in the real estate market, and commission splits may be influenced by broader economic trends. Agents should stay informed about economic indicators and be ready to adapt their commission strategies in response to market fluctuations. Diversifying income streams and being financially resilient will be crucial in navigating economic uncertainties.

Specialization and Niche Markets: In the future, specialization within niche markets could become more prevalent. Agents who position themselves as experts in specific property types or demographics may find opportunities to negotiate favorable commission splits. As the real estate landscape becomes more specialized, agents should consider developing expertise in niche areas to stand out and command higher commissions. For new agents, choosing a niche or specialization allows for a solid foundation to begin building their real estate brand. For more seasoned agents, it increases the opportunity of visibility and signifies an evolution based on their growth in the industry, and have learned the areas where they excel and can offer value to consumers.

The future of commission splits in real estate is likely to be shaped by multiple factors, including technological advancements, changing consumer expectations, economic conditions, and a growing emphasis on specialization. Proactive agents who keep market indicators and trends top of mind have the opportunity to be successful agents. Adaptability is key along with the continuous act of adding value and practicing clear, concise, and effective communication with consumers. Continuing to adapt to market dynamics, and embrace innovative strategies while anticipating these changes and strategically positioning themselves, real estate professionals can thrive in an evolving industry. 

National Real Estate Management Group encourages its team to understand the value of remaining agile, open to new approaches, and focused on providing exceptional value to clients in the ever-changing real estate landscape. We also offer extensive training and mentorship to help our team members pinpoint their niche and amplify their unique selling point (USP) to help them connect to the clients who are looking to connect with them. We can help you do the same. If you are looking to set yourself apart in 2024, schedule a one-on-one call and learn how what NREMG has to offer can help elevate you as a real estate professional, your services, and ultimately, your business.