Is There a Way for Realtors to Earn Residual Income?

Consumer confidence in the Real Estate industry is on the rise with the recently sharp increases in property values. Historically low mortgage interest rates are also on the upswing. These are great signs that Real Estate as a career is again becoming a viable choice for those looking to supplement their income, or transition from the traditional corporate 9 – 5 grind. With the anticipated influx of new and returning agents coming into the Real Estate market, companies are scrambling to attract them with aggressive compensation packages. To stay competitive, companies are forced to look at new ways to offer more value to their work force, hoping to increase loyalty and efficiency.

One very appealing concept present in the field today is the idea of RESIDUAL INCOME for Realtors. As an agent, you sponsor another agent into the company and get paid a bonus for every transaction closed. Because there are a few programs available with varied components, here is a list of must-haves if you’re looking to get into this type of plan:

1. Simplicity: Recruit an agent and earn a (typically 5%) sponsoring bonus right off the top (before any deductions) for each closed escrow. No gimmicks. No fancy calculations.

2. Risk Free: The sponsoring bonus is NOT affected by company profitability (of lack thereof), as with a profit sharing program.

3. Long Term: The sponsoring agent is VESTED after, for example, 7 years; meaning the bonus will continue to be paid even after sponsoring agent has retired from the business and is no longer licensed.

4. Unlimited Potential: There is no CAP on the amount of income that can be earned with the program. The more transactions closed by your sponsored agents, the more income you can generate.

5. Direct: Payout should be single level only – offering no multi-level aspect, which sometimes carries a negative connotation. Each agent has equal opportunity to build their own residual income by recruiting their own team of agents.

6. Instant: Begin earning income as soon as the recruited agent closes transactions. There should be no qualifying with personal production.

7. Company Wide: You may recruit agents into any franchise office location nationwide.

8. WILLABLE!!! Your residual income should be a business you can grow and leave as a LEGACY to your heirs after your passing.

9. High commission. In order to fund these types of bonus programs, many companies lower the base Realtor commission to 80% or lower. Don’t let this happen to you!

As always, read the fine print when researching companies’ offerings. Make sure, for example, that you’re not earning 90% commission based on an amount from which nickel and dime fees have been deducted – making your bottom line earnings closer to 70%. Sometimes, especially if you’re a brand new Real Estate Agent, the quality of training, the availability of low- or no-cost advanced technology tools, and a positive, high energy environment is more important than simply earning a high commission split. However, I do know of at least one Realty franchise that is offering a comprehensive package offering all of the above.

The concept of residual income for Realtors is not new. It’s just not popular with brokers because it severely limits the profitability for the broker. But there are brokers out there that have embraced this concept which I believe to be the direction into which the industry is headed. If you just do a little searching – or asking – you’ll find the answers you seek.

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