Understanding off-the-top fees as a Realtor

Recently, I’ve been getting many questions regarding “off-the-top” fees that real estate companies charge their agents.

If you are working at a real estate company, you are probably subject to some kind of commission split between you and the company. Imagine it's 60/40, 70/30, 80/20 - whatever it is you'll have some split with your broker. This means that you will get a portion of the real estate commission and your brokerage gets a portion of the commission.

Generally if you go work for a massive franchise like Century 21, Coldwell Banker, RE/MAX or Keller Williams, they are also going to have an “off-the-top” fee. Remember, this is in addition to your commission split.

Typically, this is anywhere between three and eight percent of the total commission. This represents a royalty to the franchisor. So Keller Williams corporate in Austin, or Coldwell Banker corporate in New Jersey gets a portion of your commission before you do.
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As an example, let’s say you earn a $10,000 commission and your company charges a 6% off-the-top fee. Before your commission split is calculated the company will take $600 out of the $10,000 and send that to Coldwell Banker in New Jersey.

Now you have $9,400 left. Your commission split will be calculated on that $9,400.

Once you finish taking real estate classes, you are naturally going to interview with various real estate brokers and an important question to ask is “What’s my commission split?”

However, you’ll also want to ask if there are there any other fees that are deducted before the commission split is calculated. Some brokers will charge an errors and omissions insurance fee for professional liability insurance. Some brokers will charge you a document scanning fee, or some other “desk fees” to work there.

As a newer agent these are questions that you need to ask of the broker and be as educated as possible so you are fully aware of what you're getting into.

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Love,

Kartik