11 May Keller Williams Commission Split
The Keller Williams commission split structure is very unique. In fact, many agents at Keller Williams earn MORE than 100% of their commission every year. Does that sound weird? We understand. Keep reading. 😊
The History of Keller Williams Commission Splits
In the 1980s, Keller Williams made some decisions about commission splits that shaped the growth of the company. The philosophy behind the Keller Williams commission split both then and now is that every agent should pay their “fair share” every year. Not MORE than their fair share, not LESS than their fair share, but a number that leaves both the agent and the company feeling good about their arrangement.
The way we decided to do this at KW was to cap the amount of commission we can earn from each agent in a given year. Once that agent pays their “cap” for the year, they earn 100% of the commission from their deals until the following year. When the year is done, the cap resets and it starts over again.
Here’s a quick example with some simple math:
An agent joins Keller Williams on September 15th. That means their anniversary day (when the cap resets every year) is October 1st. The anniversary date always on the first of the month after the day they join.
The agent is on a 70/30 commission split regardless of their level of experience. Brand new agents are on a 70/30 split and experienced agents with large teams are also on 70/30 commission splits.
The cap at this particular office is $18,000 per year. The cap amount varies in each office depending on the cost of operating a business in that particular area, and the average sales prices in that area. The more expensive areas in the world have higher caps and the less expensive places in the world have lower caps. $18,000 is a common number across the company.
The agent quickly gets up and running with Keller Williams training and closes a few transactions within their first few months in the business. One of those transactions is a BIG one and they pay their cap for the year.
Transaction #1 produces gross commission of $11,000. From that, 30% ($3300) goes to KW and the remaining 70% ($7700) goes to the agent. The cap balance is now $14,700.
Transaction #2 produces gross commission of $8500. From that, 30% ($2550) goes to KW and the remaining 70% ($5950) goes to the agent. The cap balance is now $12,150.
Transaction #3 produces gross commission of $47,000–the agent’s first luxury deal!. From that, 30% goes to KW, but only up to the remaining cap balance ($12,150). The rest of the money goes to the agent ($1950, which is the difference between $14,100 and $12,150, plus the rest of the commission they normally earn at 70%, or $32,900, for a total of $34,850). Now the agent has “capped” for the year and will enjoy 100% of the gross commission from every closed transaction until October 1st of the following year.
Sweet deal, right? We think so too. But there is more…
How can an agent earn MORE than 100% of their commission at KW? How does that make sense?
Another unique feature of Keller Williams is their profit sharing system. Keller Williams was the first residential real estate company to share their profits with their agents in a meaningful way. The calculation used to figure the profit share distributions every month means that KW profit share is an “equal opportunity, unequal outcome” system. To put it another way, every agent at KW has an opportunity to earn serious money through profit sharing, but many choose not to participate.
We go through KW profit share and growth share in detail in this post.
It has become increasingly common for KW agents to earn more in profit share every year than they pay through their capped commission split.
So, Keller Williams isn’t just a 100% commission real estate company, it’s a 100%+ commission real estate company. If you pay the company $18,000 per year through your commission split and the company pays you $23,000 per year through profit sharing, how do you calculate that split? The company is literally paying you to work there.
This screenshot shows how much the top profit share earners have made from January through August of 2020, to give you some idea of how big profit share can get. Keep in mind that the country (and real estate industry) were shut down for several months during this time period!
Profit share is the fourth column on the image above. As an interesting side note, you will see that seven of the top fifteen profit share earners have produce ZERO commission from real estate sales this year (the GCI column shows the commission). Some of the people on that list are fully retired from real estate sales because they can live very well on their profit share income alone.
As long as they have been with Keller Williams for at least seven years and one day, they are “vested” for the rest of their lives (as long as they don’t leave KW and join a competitor). They can even include their profit share income in their will and leave it to their estate. It will continue to pay their estate as long as their estate pays the annual $25 fee and the work they did before passing continues to generate profit for KW.
Keller Williams Team Commission Structure
The proliferation of real estate teams has been an interesting development over the past decade or so. In essence, real estate teams function as “mini brokerages” underneath the Keller Williams umbrella.
Why would a team work with Keller Williams instead of starting their own brokerage? Easy. They get all the autonomy of running their own business at KW without the financial risk. Keller Williams is specifically designed to support agent teams.
Every team has the ability to create their own commission structure, so there is no standard team commission structure. There are some commonalities to the team commission structures, though.
Here’s what a typical team commission structure setup would look like:
The agent who owns the team pays a full cap to the KW office every year of $20,000.
Each additional agent on the team pays half a cap to the KW office every year, or $10,000, BUT that cap is “guaranteed” by the agent who owns the team.
The buyers agents on the team pay 50% of their commission from each transaction to the agent who owns the team. So if they sold a house and that generated a commission check for $8000, half of that would go to the agent who owns the team (to pay for staff, marketing and tools for the team) and the other half would go to the buyers agent. That means $4000 for the buyers agent and $4000 for the team owner in this example.
IMPORTANT NUANCE: The $4000 paid to the team owner is used to pay toward the $10,000 split to the KW office in addition to paying for all the staff, marketing and tools for the team. The math here from the team side would be 70% kept by the team owner ($2800) and 30% paid to the KW office ($1200) until the full $10,000 cap is paid for the year. Once the buyers agent has done enough business to pay the $10,000 cap for the year, the team owner will get to keep the full $4000.
The buyers agent is at a 50% commission split with the team all year and that amount never caps with the team, even when the $10,000 cap has been paid for the year to the KW office.
As you can see, the potential to build a BIG business is possible with the KW team structure.
Parting thoughts about commission splits at KW
We tell our agents that they should not be choosing a real estate company based ONLY on the company’s commission split. Yes, we all need to make money and KW understands that the math needs to work for everyone. We also know we have one of the most generous commission splits in most places around the world.
The problem with making the commission split the biggest component of your decision is that a higher commission split for you ALWAYS means fewer services and support for you. Always. If your brokerage is not making enough money to pay for technology, staff, marketing and educational programs, you will not be learning and growing at a fast pace in the real estate business.
Robust training and support systems are possible at Keller Williams because of our large office sizes and culture of sharing. Those things are difficult or impossible to duplicate as a competitor simply because of the massive head start KW created by being laser-focused on growth for the past few decades.
To put it another way: If the high Keller Williams commission split is the only reason you want to join KW, we are not the right company for you. Evaluating a company based only on the commission split is a short-sighted way to look at it. The smart way to make the decision is to pick the company that will help you create the biggest business and the best life possible, with the smallest number of headaches along the way.