Bonuses and Residual Income

I'd like to put forward a concept for discussion on recruiting bonuses and residual income for agents and brokers.

There are a number of companies that have built their businesses around these compensation plans, with the most well known being Exit, KW, and Avalar. Many mortgage companies do this as well.

Without going into great detail on each one ... my research indicates that most are ineffective and limiting (pay very little), or are lop-sided to beneift those who "got in early". They are, however, an effective tool for recruiting and retaining agents. They also address key
issues facing our industry: retirement & healthcare costs and long-term value created for your time spent in the business.

The concept for discussion is this:

The creation of a uniform and united recruiting bonus and residual income plan that can be adopted by any agency, anywhere. It would:

- Be cross-agency and cross-country (meaning that recruiting bonuses would be paid for introduction into any participating firm anywhere in the country or world)
- Cost nothing to adopt (meaning that you would not have to pay a franchise fee to offer it to your agents)
- Be structured properly so that it is not abused by non-productive agents.

Benefits to Broker/Owners:
- Helps with Agent Recruiting and Retention
- Creates Exit Strategy for when they leave the business
- Continue earning for agents recruited should they switch to another firm or start their own company utilizing this plan. (partial)

Benefits to Agents:
- Bonuses are paid from the Brokers proceeds (or could come off the top)
- Paid at the close of each and every transaction.
- Develop long-term residual income
- Follows you anywhere.. transferable


Specifics:

- Broker Contribution: 7% to 10% of Gross Commissions Received *
- Divided into 7 levels and credited to members accounts within 24 hrs of receipt.
- Managed and processed by independent 3rd party company which provides the platform to unify system (www.realsys.org)(my company)
- In some instances, revenue can be shared from other professional participants such as mortgage lenders, attys, appraisers, etc.

- Max earnings from plan: 100k/yr.
- Transferable to your heirs
- The best way to describe this is a "cooperative" that uses a cross between the Exit plan and KW plan.

A complete document describing the details, specifics and restictions of this program is available in pdf format. Please email me at info@realsys.org for a copy.


Discussion and questions.


* Broker/Owners with existing agents are deemed the sponsor of those agents at the time they adopt this program.

The reason I don't like the residual concept is it makes the agent into a "recruiter". I'm sure at some time the agent's sole purpose it to get someone in for the $$ rather than this is a great place to work. I've heard the most successful companies are the ones that do not offer any recruiting incentive whatsoever. The agent incentive is to bring in top notch agents - not to get money.

I think what most agents don't realize is the residual income basically comes from their contributions & hard work anyway. Exit agents are on a 70/30 split so technically you're getting back your own money. Since it's relatively new, I wonder how the reality of it will be for an agent 20 years down the road. Do they relly have the retirement income these companies preach?

I know KW is very successful but I have also known KW agents that have left for one reason or another - despite the retention aspect of the program. I've also heard of KW agents regularly receiving bonuses of 38 cents since their model is you must actually be making money for the co. to receive the profit sharing.

Now, since you say from your research the program is inherently ineffectve, why have you created one? What is so different and/or special about yours that is going to make it work?

My agents retain 100% of their commission & pay a VERY small transaction fee. How would this program work for them?

I know you emailed me about this idea before. Isn't there a monthly or initiation fee for it?

Tanya,

Thanks for the response. There are some brokers who do not beleive in bonus programs and want to create "a great place to work" that naturally attracts agents. I will submit that these types of places are few and far between with most being part of a larger franchise system that charges fees on each closing. Technology is making it easier for brokers to start their own firm and compete.

If you are paying your agents 100% and charging them as small transaction fee... how are you making any money? What is the purpose of running an office and giving all of the income away? Brokers hire agents to make money for them... plain and simple, and each one can charge what they can based on their marketplace and business acumen. And we are moving from the all-time best real estate market to a more realistic market where agents actually have to work to make sales.. and as it slows they are going to be looking for ways to leverage their experience.
I'd bet that if you asked your new hires if they would be interested in a 90% split with the other 10% going into a long-term bonus/residual income plan... they'd be very, very interested.

But... regardless of the reasons behind this, let me clarify the differences between this and KW and Exit:

Exit pays a one-level bonus. The problem (as I see it) with this bonus model is that when someone leaves the Exit system... that bonus is gone forever. And many agents do leave Exit. And when agents who are in their system stop producing and retire... those bonsuses attributed to them stop. They are not selling anything so no income is coming in.

KW, as you mentioned, has to have a profitable month/office in order for any bonuses to be paid. I've spoken with numerous KW agents who have been lured into KW with the bonus plan and then left because it didn't work like they anticipated. KW is a great company in terms of support and training, but their bonus program isn't really very effective for most agents.

My plan is a hybrid of these two which pays at the close of each transaction, and is multi-tiered. It is multi-tiered because that provides a compounding effect as participants join AND it allows agents to receive bonus income from agents that are part of the "hierarchy" even if some agents leave the business or stop selling all together. That's what makes this effective. Combine this with the fact that this program is cross-agency and portable (usable in any company and follows you wherever you may go) makes it more realistic to achieve real earnings. Even someone in a one-man shop can join... doesn't have to be a broker hiring agents.

Also - the average agency can integrate additional add-on earning programs to help offset this cost if they want.

Another point that broker/owners should consider is the potential future value of their company should they decide to sell or leave the business. Most small and mid-sized firms have virtually no value at resale because it is very easy to start a new office or have agents absorbed by a competitor. If they were to implement this plan they could build long-term value that they can take with them or which is saleable or transferable to a new owner.

There is no such thing as the perfect plan.. but for anyone who owns an office, is starting an office or is looking for a long-term income solution.. this is something to consider. I have a complete program description in .pdf format that explains all the details and you can contact me through the message board for a copy.

Good points for discussion. Thanks

I looked at both Exit & Avalar. I decided to go with a co. that gives the agent more $$ up front & let them decide where to invest it (although I think it's a fair assumption that most agents spend it as opposed to save it).

I make money on the nominal monthly fee & per transaction fee charge. I don't make a lot but it wasn't my intention when I started a company to jet set around the world off my agents hard earned money. I'm also not a bare bones 100% commission concept company being that we have a fully equipped 2000sq ft office with conference room, training, coaching etc. Just as buyers & sellers were looking for more options from a real estate company (lower fees, ala carte pricing), agents now have the same choices when deciding where to hang their license & want more choices within the company like designing a personal commission structure that suits their needs.

Where are you with this? Do you have companies on board?

Where I am at with this is in discussion mode and determining the best approach to take based on market acceptance. It represents a substantial commitment of my time and resources to launch and I'd like to make it the best possible solution for everyone involved.

It is 100% ready to integrate and can be adopted by any company... however there are some operational details to work out like with any new service (electronic bank transfers, record keeping & reporting, etc.).. to make it simple for the broker/owner.

Send me your email through the private message system and I'll send you the .pdf file to view... because it explains all the details and you will see the safeguards placed on the program to prevent abuse and make it "fair" for all involved.

I would like to get more brokers involved in this discussion who are facing agent recruiting/retention issues that will take a look at this and give feedback....

I am on the fence on this one.

However, I am trying to get a good handle on options. I will send you an email for you to forward the details.

R

Based on some feedback I have included an online transaction management service and E&O insurance coverage into this offering... so the contribution now covers those item costs. This is being done to add value to the service.

I've also included in my .pdf an option which allows anyone to participate... be they a realtor, loan officer, atty, inspector, individual, etc... so now those service providers you work with and give business to can help
you build a long-term earnings plan... while creating one for themselves.

Supplied are some figures based on example transactions using an 8% rate which can be paid by the broker or come off the top of commissions received.

Please contact me through the message system for a copy of the .pdf file (7 pages).

Hello everyone .. I wanted to announce our new brokerage here in California.

If anyone is interested in our company our website is www.brycorealty.com

We are a virtual company.

our value prop is

"Better than owning your own Real Estate Brokerage"

I know most of you work hard make your business grow.. we have a great way to build a sustainable income.. and we share our profits with you.

I look forward to your comments.


You can contact me vial email and I will send you information or we can do a presentation online.
hr@brycorealty.com

YES we do offer residual income model..we find that agents really love the program.

Broker--I see that back on June 10 you were discussing Exit Realty and KW. You say that Exit Realty's residuals do not stay with the recruiting agent into retirement, but according to what I read, they do, even if the recruiting agent is no longer praticing. I've been trying tolearn more about Exit. Do you know something I don't. I'd love to hear from anyone who has had first-hand experience.

bryco, SEASON Professionals?
Maybe they only work in the fall?

CeeFee,

What I said was that bonuses attributed to members of Exit who retire or leave the business stop. They are not producing sales so there are no bonuses attributed to them. If an agent retires and those agents they recruited in continue to produce, then bonuses are paid at a reduced rate.

Thanks Broker. Sorry for the misunderstanding. Do you know anything else that might be helpful to someone considering buying an Exit Franchise? I've looked all over the polace and can't find a website other than those put up by franchisees. Don't they have a headquarters? Sheesh.

www.exitrealty.com

Everything you need to contact them is there.

CeeFee,

About EXIT Realty's program. As an agent with EXIT, you introduce to the owner/broker someone whom you've created a relationship with and whom you feel would be an asset to the company. IF they are hired, that new agent is expected to attend the basic EXIT classes (usually provided free by the owner/broker). The agent who made the introduction is assigned as the new agent's mentor, but this does not preclude them from going to either their sales manager or owner/broker for help.

For all this, the agent who made the introduction is paid from CORPORATE(based on the new agent's production)the following:
10% (as long as the mentor's status is Active)
7% (when the mentor's status is Retired)
5% (to the mentor's Beneficiary)
Also, at anytime the mentor is retired, they can increase their residuals by introducing new agents. AND, that same retired agent can come back full time, and once they have reached active status, they start earning the 10% residuals.

Agents with EXIT have a 70/30 split with their owner/broker for the first $100,000 in gross commission (this threshold may change depending on the owner/broker). After the first $100,000 it increases to 90/10. This is how EXIT agents are earning 100+%.

The one thing that I love most about this program...it is NOT multi-level. I pesonally do not want to be paid any amount for someone my recruit, or their recruit, etc. brought in for one simple reason...I did NOT mentor them. What DIRECT action did I take with my recruit's recruit? NOTHING. And that is why I run as fast as I can away from anything that is multi-level. For some, it's okay. For me, not a chance. I've seen too much corruption in some of the more popular companies; and in those companies where it has not occurred yet, it is too inticing to fudge the numbers. I like things simple and straight forward.

If you, or anyone else, would like more information on EXIT Realty's revolutionary program, please feel free to contact me.

My personal opinion.
No one can manage my money better than myself.
I pay every month to the government (ok quarterly), how much of that money do I get back? Pennies on the dollar? Even social security’s, going bankrupt. Why should I trust anyone to manage my money better than I can myself? Maybe if I pay them enough, will I get a better return on my investment?
Decide for yourself who is better qualified to manage your money.
Only you know, how much control you want to give up to someone else, to manage your hard earned money.

Well some people think they know what's best for others. Look at the brokerage industry that thinks they can pass stupid laws preventing people from deciding what real estate services are best for others. Back to exit the people that like exit are those that depend on someone else to pay for social security.

These services like realsys.org, avalar, kw and exit are taking advantage of people's dreams and hopes of getting something to do nothing.

"Look at the brokerage industry that thinks they can pass stupid laws preventing people from deciding what real estate services are best for others."

The brokerage industry doesn't pass laws. The ability to give rebates should be allowed and ultimately will be allowed around the country.

"Back to exit the people that like exit are those that depend on someone else to pay for social security."

Everybody depends on someone else to pay social security... that's how it works. We are paying for those that get it now, and when we retire it is to be paid by the new workforce. But there is no guarantee of that now and the SS Admin is anticipated to go bankrupt. FACT: Only 18% of the working Americans will be financially independent when they retire. The median income for all persons 65 and older is $18,157.00, and this figure includes social security income (Source: Social Security Administration)

"These services like realsys.org, avalar, kw and exit are taking advantage of people's dreams and hopes of getting something to do nothing."

Not true and you are missing the entire point of why these companies do this: it is to recruit and retain agents and develop long-term income. Ask any broker who recruits agents and they will tell you that it is a hassle and on-going challenge. An experienced agent can leave and open their own shop at any time. It's one form of business development and they are not getting something for doing nothing... they are getting something for helping build the business.

And.. if they can get that and replace what will most likely ultimately be lost because of SS's demise... more power to them. There are no pension or retirement plans for agents and though they should set them up themselves... most do not. And no one pays their health insurance. Sure there are exceptions but that's the majority of the industry. My proposal takes all that is wrong with KW, Exit, Avalar, etc. and addresses the flaws and brings it into a unified system that can benefit the industry.. which is why I propose it. Instead of paying 7-8% for a royalty, pay it into this and cover your E&O, improve compliance and build retirement income... pretty simple.

I agree with Pikes that no one can manage their money better then themselves... but it's not their money that is funding this... it's the brokers.... and agents still get their regular splits.

Well they have no choice. The FTC will make sure rebate is legal. but i'm not quite sure if consumers are buying into this rebate stuff it's just a discount broker in disguise.

you want to retain agents? Help them get more sales. They don't need another scheme to suck money out of their pockets.

OH YEAH? How much benefit is it if I am already getting 100% of every sale? The money does come out of the agents pocket.

Get with the trend the future is 100% commission. If you want to help the industry blossom dreams of future prosperity spend your time to develop a system to increase profit for agents making 100% commission.

Theotherside... I'm not going to waste my time debating this with you.

No one size fits all, and every person has to determine what is right for them. You are clearly focused on one business model which you feel is "the best". More power to you.

Maybe when you've been in the business awhile (like over 15 years) you will understand the industry better and the dynamics which drive these business models.

Good answer.

The dynamic of this business is sales buddy, not some cleverly disguised pyramid scheme. People are interested in feeding their children today. I met a man that was 85 years old and just finished his GED. 15 years in the business and still haven't moved up?

Dead horse.

"The dynamic of this business is sales buddy"

Exactly. And I'm not your buddy.

"not some cleverly disguised pyramid scheme"

no pyramid scheme, just a system of bonuses and overrides similar to one used by the majority of all financial institutions and insurance companies and any organization that has a commission-based sales force.

I'm done here unless you come back with something else unprofessional and juvinile.

Hello Broker,

I would just like to say i am not a broker but have owned businesses in other fields in the past.

The truth is we can theorize and create all day long,the true test is when the plan is implemented among agents and it will either flop or fail.


I can give you my experience.I started out with Metro brokers/gmac real estate in ga.A traditional brokerage on fat splits where i made very little money.I then went to www.solidsourcerealty.com.I had recieved other recruiting e-mails from other firms but this one was different,all the brokers said you will be sorry going to a 100 percent firm because there is no support.This was normally true but i decided to check it out anyway.

When i got there i was blown away,if i ever decide to leave they let me keep my business.I get 100 percent commission and pay a 45.00 a month fee that covers the mls's,e&o is paid one time a year at 150.00.

When i joined they had about 200 agents,now they were just named number 1 pacesetter for any business in the state of ga by the atlanta business chronicle and the company now has over 1,000 agents.I think that speaks by itself by the response on what agents want.

The newer agents tend to choose the low split companies because they need more work.Solidsource used to accept new agents but will now do so only under a mentoring program for the first few transactions with low splits.The 100 percent business model tends to attract the top producers who have no interest owning there own company.

Exit realty that split is a joke at 70/30 as we all know only a VERY small percentage of agents will commission over 100k a year,so that 100 percent is not very attainable for most agents.We all know new agents are where the brokers make there money on fat commission splits,the agents usually sell 1 to 3 deals before they poop out an quit.

The industry average turnover rate for agents changing companies is 40%,Solid source a 100 percent companies turnover rate is 5%.

I hope your business model works out.good luck

Theotherside: My, my. You need to work on your tone--it comes across as flaming, and you sound more bitter than constructive. Also, your punctuation skills are wanting--it's hard to follow what you're saying. As a result, you might be misunderstood--though you probably do indeed have something worthwhile to say. Just an FYI from an onlooker.