The first way is the most obvious and most frequently pursued. But it’s not the best option if you don’t want your real estate business to take you even more time.
The second and third ways are less often pursued, but very powerful if you can pursue them together. Neither of them add to your time commitment, but both can add significantly to the bottom line.
Ok, let’s get started.
- Increase Your Volume
This is what most people think of when they’re wanting to increase their commissions. Just increase the number of transactions and you’ll increase your commissions. While this is certainly true, it requires more effort. Each transactions represents hours of additional work. That’s fine if you’re wanting to do this full-time, but if you’re wanting to do this on the side to supplement or replace your ministry income, this is usually not the best option.
- Increase Your Commission Split
A commission split is the arrangement between a broker and an agent that specifies what percentage of the commission the broker keeps and what percentage the agent keeps. This is not set in stone but varies between brokerages. Most agents don’t initially think of this as a viable way to increase their commission income because it’s not something they feel they can control. They believe that the broker sets these splits and they can’t change them. While it’s true that they may not be able to negotiate better commission splits with their current broker, it’s completely within reason for them to shop brokers and perhaps switch to another one with better splits. Or even better, find a broker that charges a flat fee and allows you to keep 100% of the commission.
That’s what I recommend to people getting their license and that’s the type of brokerage my wife and I own in the Lubbock, Amarillo, Midland/Odessa, and Dallas/Fort Worth Texas markets.
Increasing your commission split by changing brokers could increase your commissions significantly without increasing your volume.
I was talking to a pastor’s wife in our brokerage recently and she had just closed her 2nd transaction. She was pumped to be getting a large check for around $12,000. I reminded her that with most brokerages, she would’ve had to pay out 20-50% of that commission to the brokerage. That doesn’t even count other monthly brokerage fees they might charge.
Renegotiating your commission splits or changing brokers is a relatively easy way to dramatically increase your commissions.
- Increase the Home Values
Here’s the secret about real estate commissions. Because commissions are paid as a percentage of the sales price, the commission on a $1M house pays 5x more than a $200k house. And often for the same amount of work. Crazy, huh?
Said another way, you’d have to do 5 transactions at $200k to make what you’d make doing 1 transaction at $1M.
At 6%, the average total commission on both sides of a real estate transaction in Texas, if you make half that by representing a buyer or seller on one side of the transaction, it looks like this:
$200,000 x .03 = $6,000
$1,000,000 x .03 = $30,000
Wow! 5x more!
If you’re looking to increase your commissions but decrease your workload, serve higher-end areas.
Now, if you’re just representing family & close friends, you don’t have much control over how expensive their house is when you help them sell or how much they are able to spend when you help them buy.
But if you move beyond just family & close friends, it can be strategic for you to advertise and build relationships in higher-end areas because it can increase your commissions and decrease your workload, which is exactly what you are looking for if you’re doing this on the side.
Becoming a real estate agent, choosing a flat fee brokerage, and working in high-end areas can be a great way to supplement your ministry income!
