Real Estate Desk Fees & Transaction Fees, and Their Impact on Income
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I wish I had realized the true impact of real estate desk fees and how much it would affect my income as a Realtor. I’ve written before about how I grossed $50,000 my first 9 months in a brand new market after moving to a new state.
I just finished up a review of Real Broker LLC at joinreal.com and now that I’ve taken the time to do some research, I’d like to share the differences between different splits and fees. Of course, in your own market, desk fees and brokerages are probably completely different. Bear in mind that these are just examples for comparison.
My Real Estate Background
I was a banker for 8 years before I decided that 14 conference calls with upper-management every single week to see how many checking accounts and loans we have opened was not for me.
This is a slight exaggeration, but it was pretty damn close. Micro-management isn’t fun for anyone, and the banking industry (especially Wells Fargo) is notorious for pushing products that people don’t need.
I wanted to help people…and I wanted to be my own boss. So I became licensed in 2012, and it was one of the best decisions I could have made in my career!
My First Brokerage – Split Commission Example
I only interviewed one brokerage before planting roots with Exit Success Realty in Warner Robins, Georgia. I joined a team and quickly learned that the team life was not the life for me.
Within my first two weeks of being a Realtor, I got my first pending sale, which was funded by none other than Wells Fargo (my former employer, go figure). That deal took 3 months to close, and for some reason, I decided to stay with it! That year I sold 12 homes as an independent agent.
Here’s how my split was broken down: 70% to me, 30% to my broker, $185 transaction fee per transaction, $30 E&O per transaction. So if the average sale price was $120,000 and I earned 3% on the buyer’s side, I’d take home $2306.
Of course, I’d need to subtract 30% for taxes (as a 1099 contractor, you are responsible for taxes…not your brokerage) and 10% for a marketing budget, so my true take-home pay ended up being about $1383. Oh…I also had a $50 per month real estate desk fees (or office fees).
I remember thinking $50 per month seemed like a lot for a hungry new agent! Little did I know that Illinois would cost me 90% more than that, and I wouldn’t even get a desk or an office for that monthly fee! More on that in a minute.
Switching Brokerages for a Lower Split
Then I decided to move to Coldwell Banker because they had a better reputation. Truth be told, my original brokerage was failing fast. They eventually sold and rebranded completely to Better Homes and Gardens Realty.
At Coldwell Banker, I was offered 60/40 split (up to $100k gross commission, then 100%), with a 6% franchise fee and $50 per month real estate desk fees. So for the same transaction above, I’d take home $2008 before taxes and marketing budget.
After I set aside for taxes and marketing, I’d take home $1205. So I was making less at Coldwell Banker than at Exit Success Realty, but it was worth it for the culture, atmosphere, and reputation.
Real Estate Reciprocity and Starting Over in a New Market
Then we moved to Illinois from Georgia, and I took some time to get my kids settled in school and establish us in a new area. The Realtor who sold us our home was persistent about getting me to join her team, and I eventually did.
Here’s where things got stupid expensive. The new brokerage is the top independent brokerage in the state of Illinois, with over 120 agents under one roof. It seems that everyone has a different agreement with this company, but in my case, if I was to join as an independent agent, I’d have to pay over $1000 per month just in desk fees.
I don’t know how new agents are able to do that! So I joined my Realtor’s team and paid $485 per month in desk fees (mind you, I didn’t get a desk or office for that…it was simply a fee to hang my license with the brokerage).
She also (rightfully so) took 10-20% of my commissions and all transaction volume went under her name. This is understandable because she’s the team leader.
So for the same transaction, $120,000 home, 3% buyer’s agent commission, I’d take home $1728 (after taxes and marketing), less $485 per month in desk fees and I also had to pay for my own E&O of $300 per year. This, so far, yields the highest return because my split was high. But what if I could save that $485 per month?
Real Broker LLC: No Real Estate Desk Fees and 85% split
At Real Broker LLC, there are no monthly fees and agents earn 85% of commissions up to $75,000 gross (then 100%). So, using the same scenario, for a $120,000 home, at 3% buyer’s agent commission, I’d bring home $3060, less marketing and taxes which brings it down to $1836 (with no monthly fees).
The best part is, by saving 30% for taxes, I can pay quarterly and adjust if necessary. It never hurts to have extra savings!
If you’re researching brokerages in your area, don’t make the same mistake I did in only interviewing one company. Do your homework and consider all costs involved.
Make sure you have a good emergency fund built up to cover the start-up costs of becoming a Realtor. In my opinion, there’s no true benefit to real estate desk fees. They just help cover the overhead of brokerage offices.
See if you can negotiate a lesser fee in exchange for a service, or check out JoinReal.com. It’s not cheap to go into business for yourself. But if you’re a hustler with great people skills, you can make back your investment within the first few months.
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