Commissions are the lifeblood of any real estate company. And yet, it happens so often that brokers and managers don’t have a good idea of how much is coming in and who generates the commission.
When deciding on your commission structure, you should to strike a balance between incentivizing agents and providing a consistent revenue stream for the brokerage. So how can you achieve this balance?
By tracking your commissions in depth. This will help you understand how your compensation plans affect agent performance, client satisfaction and overall profits often remain unclear.
To a lot of brokers, this sounds like a tall order -- they just don’t feel they have the time to do any in-depth tracking. They just want to get their job done.
That’s where real estate commission trackers come in. They take over some of the heavy lifting by automating calculations. They’ll make sure commissions are calculated correctly so you and your team know exactly how the commission is split and what the deductions are for each transaction.
Paid or free commission tracking software?
The first question that most brokers ask themselves when looking at commission tracking tools is: do I really need to pay for this?
When it comes to free commission trackers, many of them offer decent, but basic, functionality.
They’re fairly stable and will help you keep an overview of your commissions at the very top level. Free commission trackers should be seen as ‘generalists’. They’re not tailored to any particular industry and will not allow you to do more sophisticated tracking.
The way commissions is usually very industry-specific. That also goes for real estate, where complex commission structures are pretty common. Advanced commission trackers are likely to handle this complexity better than free ones.
Whether you’re looking for a free or paid-for solution, it’s worth checking whether the commission tracker you’re considering has the below features. These are some of the most important ones you’ll want your commission tracker of choice to have:
Commission disbursement forms creation
Agent data input
The most important task of a commission tracker is this:
Create reports and overviews of commission breakdowns, per team and per agent.
These reports should be easy to pull, depending on what you want to see. For instance, if you wanted to see average commission per agent for a certain office, you should be able to find that information in minutes.
That sounds pretty straightforward, but it often isn’t. As a brokerage grows, so does the number of transactions. The system that once worked for a smaller team starts to collapse under the increased complexity of compensation plans. On top of that, the company hires more agents, adding another layer to the process.
That’s often where the first hurdle occurs for many businesses -- accurately calculating commissions becomes a huge chore sucking up agents’ and brokers’ time. If you can’t trust your commission tracker to do this, you’ll have to double check the numbers, and lost more time.
Advanced report allows you to track performance. For instance, an interesting report would be average commission per agent per month or year. With this report you can see who is performing well and who isn’t pulling their weight.
Rather than relying on your ‘gut feeling’, you’ll have hard numbers to help you start a conversation with underperformers. The numbers will also help you set up a plan for improvement. Perhaps your agent needs more training, guidance or coaching. Once you’ve set up a plan, you can keep track of their commission and check their progress.
Detailed commission calculation
Since you want your commission tracker to generate accurate reports, it should be equipped to work with any type of compensation plan, no matter how complex.
For most brokers, commission isn’t simply a matter of calculating a percentage on the selling price. Can the tool calculate splits, caps, bonuses, time-bound comp plans, etc...? Next to that, your agents will also need to look at their taxes and business expenses.
The commission tracker should be able to do all of this automatically, based on information available in the system. If the tool you’re considering doesn’t easily integrate with all the compensation plans you have now (or might have in the future), you should probably start looking at other tools.
Your commission tracker should be able to take all of these variables into account. This way, you’ll be sure to have accurately calculated commissions. If can’t trust the tool, you might still need to redo calculations manually, wasting precious time
Read more about commission calculation here: How Do You Calculate a Real Estate Commission Check?
At some point in every transaction, the deal is done and the commission has been calculated. A good commission tracker will then generate a commission disbursement form automatically and should prepare it for review and approval.
Commission disbursement can be a huge time-sucker. Entering the splits, caps, deductions and the property information takes a lot of time when done manually. You might face a whole array of other problems, ranging from templates messing up the layout or incorrect data being used to delays in approval. So automation pays off by saving you time.
Agent data input
Compensation plans are often complex and intransparent, leading to frustration among agents. The tool should allow sharing the commission breakdown with the agent. That way, they can check it before having it signed off. In case anything looks wrong, they should have the opportunity to fix it in the system.
All of this will increase the transparency for yourself and your team. Agents want to know what they can expect to paid and will appreciate your openness -- which will in turn lead to happier agents and better retention.
Which tool should you choose?
With so many tools around, it can be hard to decide which one to get. But, there’s no need to wait to get started.
Trying a tool doesn’t mean you have to stick to it for the rest of your life. You can always test a few different tools to get a feel for how they’re different. You can also start with free commission tracking software, and move to a paid solution later on.
The most important thing is that you get a tool that works optimally for your business, your teams and your agents. So you should be looking for tailored options in the areas you find really important.
As is always the case with tracking, it’s better to track something imperfectly than to not track it at all. So pick a tool that you think might work and start experimenting with it. You’ll get rich insights into your business that’ll help you make strategic decisions.