22 Apr Keller Williams Commission Split

The Keller Williams commission split is one of the most generous in the business. It was created as a hybrid that took the best elements from a traditional commission split and a new commission structure that became prevalent in the 70s and 80s.

To understand the advantages of the Keller Williams commission split, it’s helpful to know the history of the real estate brokerage business.

There are three prevalent business models in the real estate business today and each one has a different commission structure.

The Old Fashioned Business Model

This was the first business model in the real estate industry and it still exists with some of the major US companies today. In this business model, the commission structure is split between the company and the agent. The splits are usually 50/50, 60/40, etc. with the most experienced agents commanding the highest splits and the newest agents having the lowest splits. In exchange for the commission the company keeps, they usually provide support staff, some marketing resources and some training.

Sample calculation (old fashioned):
Agent sells a $300,000 house.
Commission for that deal to be split between company and agent 50/50.
Commission for one side of the transaction is 2.5%, or $7500.
The company takes $3750 and the agent keeps $3750.
With an average of two transactions per month for a year, that’s $90,000 to the agent and $90,000 to the company.

The Barber Shop Business Model

This model grew very quickly in the 70s and 80s in the US. The general idea is that the agents pay the company a flat fee to rent a desk every month (usually $1500-$2000 a month) and they get to keep 100% of their commission. There is very little staff, training or support in this business model because the economics simply don’t work for the company owner to put much money into the business.

For experienced agents in the 70s and 80s who had consistent business, this was a great deal! They realized that most of their business was coming from their personal contacts and personal efforts, so paying the company a huge chunk of money every year didn’t make any sense. The big challenges with this model are the lack of training and the fact that if you don’t sell a house for a few months, you still have to pay that monthly fee no matter what.

Sample calculation (barber shop):
Agent sells a $300,000 house.
Commission for one side of the transaction is 2.5%, or $7500.
The company takes $2000 a month, or $24,000 for the year.
With an average of two transactions per month for a year, that’s $180,000 total commission. Subtract $24,000 for desk fees and the agent keeps $156,000.

The Interdependent Business Model

This business model was developed to create a true “win-win” between agents and brokerage owners. The Keller Williams commission split is only one component of a bigger picture. The other components are robust and ongoing education (like Keller Williams Ignite), a company culture that’s so powerful it has been studied by Stanford University three times and a profit sharing system that provides significant opportunities for ongoing, passive income.

The Keller Williams commission split is unique in that the agents receive most of the commission (usually on a 70/30 split), but the company “caps” the amount they take from an agent in any given year. The cap changes from market to market depending on home prices and other factors, but it’s usually between $18,000 and $25,000 in most parts of the US.

Sample calculation (interdependent):
Agent sells a $300,000 house.
Commission for one side of the transaction is 2.5%, or $7500.
With an average of two transactions per month for a year, that’s $180,000 total commission. Subtract $21,000 for the annual cap and the agent keeps $159,000 in commission.

The agent also received some Keller Williams profit share and earns $15,000 that year, which brings the total “cost” of being with Keller Williams to $6000. It doesn’t get much better than that.

(Please note: There are many KW agents who earn MORE than their annual cap through profit sharing, which means Keller Williams is essentially paying them to work there. Amazing, right?)

Would you like to learn more about the current and future opportunities at Keller Williams? If so, please get in touch.