Things to Consider in Commercial Real Estate Commissions

In commercial real estate brokerage there are plenty of formulas for commission that apply to agent remuneration and salary. When you start work in a new brokerage it is important to know that your commission base is fair and adjustable for the results that you can achieve. It is also important that you negotiate a fair fee for the services offered and the demands of the property listing and or client.

A salary base plus a low commission is acceptable when you are learning the ropes and the industry. You will thereby get some reward for deals done. Over time you can lose the ‘training wheels’ and move up the scale of commission; in doing so the ratio of risk and reward changes.

Greater reward creates greater risk. Be prepared to take the steps to drive your business forward. It is a personal thing; your brokerage will only be a small part of your new business equation.

So let’s look at the alternatives in commissions today:

  1. If you are paid a ‘salary’ for the start-up of your career, it is likely that a ‘debit and credit’ arrangement will exist to reimburse the broker for costs until your commissions gain traction. The process is fair and reasonable; however do not let yourself get too far behind in ‘debit’ where it will take a long time to reach pay back.
  2. Your performance and success should be accommodated in an upward commission adjustment. Far too many brokers take too long to reward achievement within the team. Soon they see their top performers move to other ‘greener pastures’.
  3. It is valuable to work on a ‘sliding base’ of remuneration, as well as an escalating scale of commission reward. The sliding scale should be adjustable quarterly or annually depending on your property type and the deal or commission averages. If you sell or lease lots of smaller properties then the scale will be different than if you sell and lease larger properties at high value less frequently. Look at how many deals you can do in each quarter and what the opportunities are in the market to sustain that for the whole year.
  4. Top agents will usually work on commission only. It takes some time to get to that level of market dominance and success. You will need a business plan and strategy of action to get to that stage of commission only reward and remuneration.
  5. It is good practice for a brokerage to reward agents differently when it comes to exclusive listings and faster results in closed deals. This then gives clear reasons for the agent to focus on generating the new business faster and more effectively with a focus on ‘controlled listing stock’.

Many agents think that they are better than they really are in skills and knowledge. If you are assessing your sales and leasing potential, be real and relevant in your assessment; look to the future but understand the reality of today.

Commissions and listings over time will come to the agents that understand the importance of hard work and the creation of market share.

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