How Can You Deliver True Value to Your Clients When You Solely Focus on Real Estate Commission Splits?

real estate commission caps

A lot of companies like to claim that anything less than 100% is unacceptable. But consider what this really means for a moment. It means absolutely no mistakes. Sounds like a pretty tall order, right? But now let’s examine this through the lens of the real estate industry. In real estate, one mistake can cost a client everything. Talk about high stakes! Can you imagine working exhaustively for 12 years, skipping birthday celebrations and vacations with a singular focus on amassing a down payment only to have an inexperienced agent fumble it away? But it happens more often than you think. And when an agent is solely focused on chasing their real estate commission instead of building client relationships, everyone loses. 

I see this as a fundamental flaw in the very structure of the real estate industry. People are expected to simply trust the biggest purchase of their entire lives to someone who’s only legal requirement is to pass a 6-hour exam? And then we’re just expected to allow them to handle complex contracts, unique situations, and massive amounts of a client’s money? I couldn’t work under such absurd conditions. That’s why I established my own firm: JohnHart Real Estate. Our philosophy is simple: give agents a wealth of tools, education, resources, and support and everybody wins. Today, I consider ourselves in a category of one. I don’t recognize competition because no one is doing what we do! But I’d absolutely love it if the industry followed suit. I’d gladly take the competition if it meant clients could put their full faith in every agent the way they can in a JohnHart agent. So how do we reconfigure an entire established industry? Maybe we start with the way an agent views their job.  

There’s a common misconception in the real estate industry shared by novice agents all the way up to the most seasoned professionals. It’s an easy misunderstanding to lapse into because it involves something very near and dear to the average agent: their real estate commission. But it’s also a misconception that completely defines the structure of our industry! The rise of high profile brokerages like Coldwell Banker, Keller Williams, and eXp directs attention to commission splits. Why? Because these brokerages are offering agents higher commissions. Today, I’m discussing why the average agent should see this as a bad thing and why it’s essential that we restructure our entire industry accordingly.

The Higher the Real Estate Commission Split, the Lower the Investment

Now, I know what you’re thinking. “Agents earning higher commissions for their hard work? How could that possibly be a bad thing?” Because everything comes at a cost. And no matter how they package it, these real estate commission splits are costing you more in the long term than you’re recognizing. I would go so far as to posit that the higher your split, the less your firm is investing in you. I know that’s a bold claim, but I have plenty of points to back it up. 

There are several common ways brokerages contract a split with their agents. One popular method is to institute a real estate commission cap. In this circumstance, an agent pays a commission to their brokerage for each transaction up until a certain point. After that point, the agent keeps the lion’s share of their earnings while the brokerage still shares responsibility throughout the transactions’ processes. Sounds pretty good, right? But how invested do you think that brokerage is in your success once you cross that threshold? I’ll let you consider that a bit and circle back to it later. 

In the meantime, let’s talk about another kind of deal you’ll find firms cutting with their agents: transaction-only. Firms that deal on a transaction-only basis take a certain cut from each transaction that their agents make. Whether an agent does one transaction or 100, that commission remains. What does the agent get in return? Usually, the privilege of doing business under the firm’s branding. That’s about it. But it doesn’t have to be this way!

Stop Thinking of Saving and Start Thinking of Making

A lot of agents start out on the wrong foot. Sadly, most of them stay there too. These agents are singularly focused on how they can save money with the right contract. Instead, they should be focusing on how they can make money. And with a long-term strategy, this is more often achieved through a high volume of transactions than a scant few high commission transactions.

Agents who do the math will recognize they could be earning more by focusing less on the most attractive real estate commission cap offer and more on doing as many transactions as possible. Easier said than done, right? Well, that depends on who you have supporting you. And this directly ties into the way we need to restructure the real estate industry.

Million-Dollar Agents Need a Support Team

In short, you need a full-service support team backing you, managed by your firm so you can focus on what you, as an agent, know best. Have you been thinking like a salesperson? Million-dollar agents aren’t salespeople. They’re business professionals interested in serious growth. And professionals require a team that has their back every step of the way. Consider a doctor, for example. How often do they go it alone? They have the support of nurses, techs, and reception staff at the very least. Why should a realtor be any different? 

a talented support team frees you up to do more transactions and make more money
Photo credit: Envato

When I interview a prospective agent, one of the first questions I ask them is “What is your hourly wage?” This typically elicits a dumbfounded “Huh?” So, I follow up with “What is your true North Star; your ultimate goal in this business?” More often than not, they answer, “To make a million dollars in real estate commissions.” Okay, easy enough. You just need to make a little south of 500 dollars an hour. So, let’s imagine this is your hourly wage. 

Now, these same agents with the million-dollar North Star will spend two hours of their day driving to some remote location to do something as simple as hanging up a lockbox. And this actually leaves most of them feeling accomplished! At 500 dollars an hour, hanging that lockbox comes with a 1,000-dollar price tag. Worth it? Now, how about if I have a member of our support team do this for 30-dollars-an-hour? That seems a bit more efficient, doesn’t it?

This example simply illustrates a basic but profound truth about this industry and really mostly any industry: time is your most valuable asset. Do you think you become a million-dollar agent without using your time effectively? Well, shatter that illusion now. Because the truth is that, no matter how impressive your realty skills, generating business takes work. And work takes time. And I hate to be blunt but spending two hours hanging a lockbox is not a use of your time that should fill you with pride. But people love to take the path of least resistance. Sometimes it works. This isn’t one of those times. 

Are You a Salesperson or a Business Professional?

At this point, you need to make the decision of whether you’re a business professional or just another salesperson. A salesperson is a one-man band. And they’re rarely netting million-dollar annual commissions. A business professional, on the other hand, knows when to roll up their sleeves, but also recognizes when to delegate. They don’t have time to go hang a lockbox; not at their pay grade. Ideally, we should be working in an industry in which your brokerage takes care of those kinds of tasks and a lot more so you can put your time, energy and focus where it really matters. 

So, if you’re a realtor already working for a firm, ask yourself: what is your company giving to you? Think about the money you need to sink into your pursuits to succeed. Are they supporting you, giving you the tools and resources to reach your North Star? Or do they take more than they give? I can’t speak for your brokerage, but I’m familiar with how this industry operates… and it’s not with you as a top priority. But let’s consider my real estate industry utopia for a moment, summarized into 5 key improvements over the current industry structure.

(1.) Staff

Management takes time, experience, compassion, strategy… the list goes on. Who’s managing your team? And if it’s you, how many of those 500-dollar hours is it costing you a day? Now, think of the costs you’re actually paying out of pocket for your team. Of course, I’m assuming you have an attorney, MLS coordinator, copywriter, photographer, videographer, marketing manager, graphic designer, social media manager, web developer… wait, you don’t have all of those? Okay, well surely you have regular access to the tools you’ll need as a million-dollar realtor. You know, signs, copy machines, things like that. And don’t forget the costs of intangible necessities like web hosting, email scheduling platforms, and SEO tools. 

imagine a team of experts behind you helping you net your real estate commission on transaction after transaction
Photo credit: Envato

Even on the off chance that you have the money to cover all of this, are you the one overseeing it all? Are you handling human resources questions, managing multiple personalities and all of their individual needs, and giving the direction needed for your machine to run without a hitch? If so, I applaud you but just have one more question: how do you handle all of that and still have time to sell one house let alone close the number of transactions you’d need to hit that million-dollar mark? 

(2.) Agent Growth

Does your current firm expect you to pay for your own coaching? Even a mid-tier realty coach isn’t cheap. Imagine if instead your firm had agent growth built into its business model. Not a single agent would be responsible for paying for coaching. You’d instead have access to staff whose sole responsibility was to ensure you never need to seek outside assistance, no matter the challenge. From daily reminders of how to generate business to in-depth strategically sound business plans, you’d have everything you need to succeed. 

Remember earlier when I said there’s a downside of surpassing a sales commission cap that we’d circle back to later in this blog? Well, here it is, though I’m sure many of you have already guessed it. Once you pass your cap and begin collecting 100% of your real estate commission, the brokerage no longer sees you as a benefit to them. In fact, they may even see your success as a liability! It’s a huge handicap in our industry, and it’s built right into the structure!

(3.) Support

Even veteran agents get stumped by complex scenarios. Chances are good that you’ve found yourself in more than one major scrape you had to untangle on your own. But imagine if your brokerage invested in some of the most talented, experienced support staff in the business. If you’re like most agents, you’re probably so focused on saving money by paying your broker the least amount possible that you’re overlooking how much money you could actually be making with a talented support staff.

At most firms, you stumble and fall several times before you succeed. You learn the hard way on your dime. In a best-case scenario, you hire the professionals that have already been there and done that so they can guide you around the pitfalls. But what if your brokerage connected you with professionals who had already learned the hardest lessons on their dime; who shared their wisdom with you so you didn’t have to painfully recreate their missteps?

Now imagine facing the greatest challenge you’ve ever encountered in your career with that kind of knowledge behind you; a professional to strategize with you, to advise you how to present offers and navigate you through complex transactions, to guide your way so that every shot you take hits the bull’s eye. This isn’t just how it could be. It’s how it should be.

Photo credit: Envato

(4.) Profits for Purpose

Without knowing you or your firm, I’m willing to bet that your broker invests way more in recruiters than support staff. That’s because they need a large number of agents to cover the low caps they’re offering. In fact, the more agents on their roster, the better. It’s the only way they’re going to see a profit. And once you pass your cap? Then you’re just draining their resources, not contributing to their profit. 

I have a different philosophy that I like to call “profits for purpose.” It states that a brokerage gets the most value by directly investing in building the success of its agents. Look around your place of work. Can you see money being invested in the brand? In you? When was the last time you were rewarded for your hard work? Does your broker invest their earnings in your growth or do profits just go to recruiting more agents? Or worse, to the broker’s personal vacation fund? When was the last time you got a personal call from your marketing director to discuss strategy? Or map out the long game for your quarterly plan? Or just to show any interest in your growth at all? If you don’t feel like this industry needs an overhaul after answering those questions, please let this be your wake up call.

(5.) Time

Our final benefit brings me back to a point I made at the beginning of this blog: time is your most valuable asset. Your brokerage should be ensuring you have the time to do more and, therefore, make more. With your time managed properly using the resources your firm would provide to you, you would make more.

Are you using your time or wasting it? More directly, do you spend your time hanging up lockboxes and signs, adding your listings to the MLS, writing property descriptions and email blasts, coordinating with videographers and photographers, and managing a team? If so, you’ve got a very long road ahead to becoming a million-dollar agent. Everything I just listed will easily consume 50% of your day… if you’re lucky. And these are all tasks that could be delegated to someone else. Even if you’re totally onboard with delegating these responsibilities, you have to make sure the team handling them is properly supported. Can you do that? You shouldn’t have to even think about it! Your brokerage should take care of it for you.

Photo credit: Envato

The JohnHart Experience

So our industry is broken, you’re stuck in a brokerage that doesn’t care about your success, and your million-dollar dreams have lost a lot of their color. Aren’t you glad you read this blog? But here’s the payoff: this restructured idea of the real estate industry isn’t just some fantasy utopia. It’s every bit as real as self-funded coaching and real estate commission caps. Because this redefinition of the real estate industry is the business model for my firm, JohnHart Real Estate. And it’s tried and true.

JohnHart Real Estate is among the most expensive firms for an agent to join. In fact, when a prospective agent hears what kind of cut we take, they usually need to think twice. But that’s because we offer more than a brand, more than a cap, even more than a loaded cap that appears to favor the agent. We offer what we directly reference in our slogan: “Real Estate Redefined.” At JohnHart, our average agent vastly outperforms our regional competition in number of annual transactions. Admittedly, we hedge our bets. We’re only interested in taking on agents that want to scale their business. This isn’t a supplemental income gig and we’re upfront about that. Sure, we get the odd agent who joins full of promise but later balks at working a high volume of transactions. We let them show themselves out the door whenever they want. Utopia isn’t for everyone!

Support is a Necessity

In short, what JohnHart Real Estate offers our agents that they won’t find anywhere else is a full-service support team. This isn’t a company for salespeople. It’s one for business professionals interested in serious growth. And professionals need a team that has their back every step of the way. Knowing you have the support of an attorney, agent liaison, agent liaison assistant, marketing manager, and more elevates your game more than words can describe. Having that kind of knowledge and efficiency behind you every step of the way means total confidence in your abilities without a shadow of a doubt.

Every agent on our roster has access to all of these resources at any time so they’re never distracted from their North Star. In fact, they have a team of over 100 experts at the top of their field supporting them every step of the way. Our ultimate goal is for our agents to amass so many transactions and so much wealth that they leave us to start their own brokerages. We’d much prefer that to watching a promising agent fall into the trap of caps and loaded splits at the cost of support. And if that sounds too altruistic for you to swallow, look at it this way: if you’ve made enough money to leave us to start your own brokerage, then you’ve also made us a heck of a lot of money on the way there. We’ll be the first in line to toast your success. 

Photo credit: Envato

A Brokerage That Puts the Agent First

Our licensed agent liaisons are our not-so-secret weapons. I can’t count the number of times that I’ve been approached by a realtor detailing how an agent liaison helped them save a deal in the 11th hour or get an offer accepted. In fact, our agent liaisons are a major reason why we boast such low cancellation rates at JohnHart. To quantify this, a saved deal can save a California agent tens of thousands of dollars, depending on the transaction.

Each of our agents can look forward to the availability of their expert counseling not weekly, not daily, but whenever they need it, 7 days a week. Wouldn’t you love some help strategizing your way through troubled files? You’ll never need to feel like you’re facing down a challenge alone ever again. Whether you need expert counsel from our in-house attorney or just want to bounce some ideas off of your agent liaison, you’ll have those resources.

Keep in mind that these are experienced professionals with over 3,000 closed transactions under their belts. Read that number again. That’s more experience than almost any broker you’ll find in California! And whereas many agent liaisons in other brokerages would only be working in the firm’s best interests, our general counsel is dedicated to our roster of agents first. Why would we hold anything back? Your success is our success. 

How Putting Agents First Puts Everyone First

JohnHart Real Estate always has a purpose in mind with our profits. And that purpose is clear to our agents. We feel it’s integral that our agents have confidence in our firm and we instill that feeling in them by giving them the best. Nothing less. If you want proof, just take a glance at our Facebook page where you’ll see photos of our awards ceremonies, celebrations, company dinners, even trips to Las Vegas.

We’re also very proud of an intercompany currency system in which agents accrue points through achievements like transactions, site traffic, and milestones. These points can then be used to “purchase” items and resources like drone videos, branded gear, postcards, and more. So, which environment seems more optimal for your growth as an agent? The one in which support ceases after you reach your cap? Or the one that incentivizes and rewards you? 

By putting the agent first, JohnHart gives you the time you need to put your client first. It’s the only way you’ll ever net the number of transactions you need to be a million-dollar agent. When your firm puts the focus on you and you put your focus on your client, everybody wins.

I’ve got one final question for you. What good is a dream that can never be achieved? When you go to a brokerage that offers you a too-good-to-be-true split with a generous cap, you’re being sold a dream. But without proper support, you don’t stand much of a chance of making it happen. In most cases, saving is short-sighted. The more you save, the less you end up making. But at JohnHart, we give you the systems, policies, procedures, support team, and time to give you your best chance. Unfortunately, words can never quite do justice to this experience. You just have to take the plunge and see the results for yourself. 

Questions? Want to hear more about JohnHart? Call me on my personal cell: (818) 500-7793.

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After working with, and for, many different real estate firms, it became apparent to Harout that there was a major disconnect between what consumers needed/wanted and the service that was being provided to them. It was upon this realization that Harout founded and opened JohnHart Real Estate; and as the CEO/Principal Broker he has continued to break from the norm and redefine real estate with an insatiable appetite to give his clients the service and attention they deserve.

About Harout Keuroghlian

After working with, and for, many different real estate firms, it became apparent to Harout that there was a major disconnect between what consumers needed/wanted and the service that was being provided to them. It was upon this realization that Harout founded and opened JohnHart Real Estate; and as the CEO/Principal Broker he has continued to break from the norm and redefine real estate with an insatiable appetite to give his clients the service and attention they deserve.

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