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The Business Freedom PodcastEpisode

Here's Why Value-Based Commission Splits are so Great

By REBS Team

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Here's Why Value-Based Commission Splits are so Great

REBS Team    May 21, 2020

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Group projects. We’ve all had to do them, though very few of us actually enjoy them. In theory, they're great. Many hands make light work, right? You take a large task, equitably split it between several group members, then put it all together to create a cohesive final project.

If only group projects really worked this way! Equal work for an equal result is the exception, not the rule, when it comes to group projects.

What's your role?

When working in a group, each member naturally assumes one of the following roles, depending on their personality and interest in the project:

  • The Slacker: The person who goes along with everything, contributing nothing;
  • The Quiet One: The person who does what they’re asked, but contributes no opinions or ideas;
  • The Weirdo: The person who has ideas that are completely off the wall and lack merit; and
  • The Leader: The person who ends up planning the majority of the project, in addition to delegating work to each of the aforementioned members. (Note: this person may or may not be obnoxious!)

Every member of the group offers varying levels of input and work on the final project, but the end result is the same. The person who worked the hardest gets the same grade as the person who worked the least and vice versa. Not very fair, right?

Now think about the last time you sold a home for a client that you cultivated from the ground up. You worked hard to get the lead, hustled for the client and achieved the mutual goal of selling their home for a reasonable price. Compare that to the last time you sold a home for a family member or friend.

REBS Blog 05 2018 10 Equal Pay for Equal Work Snippet 1

 

Working with the family member or friend, you didn’t have to do any work to get the lead, you put in less time on the listing, and you still sold their home for a reasonable price. Overall, you probably spent half the time than you did for the business you cultivated organically. Do you think both scenarios warrant the same compensation? Probably not.

So why are value-based commission splits so great?

Value-based commission splits are a great way to account for the amount of work an agent puts into a listing. Commissions are split at different rates, depending on the amount of work the agent put into the client. Generally, you'll offer the lowest rate on “gimmie” business from family and friends and the highest on self-generated leads. Higher effort means higher commission.

REBS Blog 05 2018 10 Equal Pay for Equal Work Snippet 2

 

When commissions are split this way, agents are fairly compensated for the amount of time they put into each listing. And when your resources play a greater role in closing, your real estate business retains more commission.

REBS Blog 05 2018 10 Equal Pay for Equal Work Snippet 3

 

To learn more about value-based commission splits and how you can use them in your business, join our next live webinar!

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Much Love & Respect,

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Lars Hedenborg

Founder of Real Estate B-School

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