Real estate agent Adam Horvit used to give half of every commission check to his broker, a sum that typically amounted to thousands of dollars.
Now, after jumping to a new breed of real estate company, he pays his broker just $75 when he closes a deal.
Horvit is one of the growing number of agents to join so-called 100 percent companies, bare-bones brokerages that let agents sacrifice brand recognition, office space and leads for more cash in their pockets.
As an agent at Linda A. Gary Real Estate in Palm Beach, Horvit said, he paid 50 percent of each commission to his company as the “split.”
Now Horvit works from his home in Stuart as an agent for Sun Realty, a 100 percent company in Naples. He pays a monthly fee of $100, and when Horvit closes a deal, he pays Sun Realty a $50 transaction fee plus $25 for errors and omissions insurance.
“Being in the real estate business for 20 years, I understood the industry, and I thought it would be better for me to work for a company where I would get a bigger share of the commission,” Horvit said. “A lot of agents are working out of their car or out of Starbucks, and they don’t really need an office.”
As independent contractors with no employment contracts, no salaries, no benefits and no pension plans, Realtors are the ultimate free agents. They can — and often do — move to whichever broker offers the sweetest deal.
Most commonly, agents keep 70 percent of their commissions and pay their brokers 30 percent to cover such costs as advertising, training and yard signs — although agents are free to negotiate the most favorable split they can command.
For many agents, the best offer in recent years has been dangled by United Realty Group, a rapidly expanding 100 percent company based in Plantation. It had 382 agents in Palm Beach County as of March 12, according to state licensing records. That makes United Realty Group the county’s fourth-largest brokerage, behind such venerable names as The Keyes Co., Coldwell Banker and Illustrated Properties Real Estate.
Other 100 percent companies have recruited dozens of Realtors in Palm Beach County. Charles Rutenberg Realty, a company that predates the housing bust, counts 86 agents in the county.
The K Co. Realty, a Pompano Beach brokerage, has 84 agents in Palm Beach County. Reflecting the popularity of 100 percent companies, The K Co. ranked 181st on last year’s Inc. 500 list of the nation’s fastest-growing private companies.
True, only a small percentage of the 20,000-plus real estate agents in Palm Beach County work for 100 percent companies, but the business model is catching on — and traditional brokers are taking note.
Ben Schachter, broker at Signature International Real Estate in Boca Raton, is an investor in Realty One America, a startup that uses the 100 percent model to recruit agents. In exchange for a $99 monthly fee and a $99 transaction fee, Realty One America lets agents keep the entire commission.
Schachter argues that agents are better served by a full-service business model, one that charges agents more but provides support. Signature International Real Estate’s offerings include training sessions with Mike Ferry, a nationally known sales coach.
Schachter compares himself to the owner of a high-end steakhouse who also wants to accommodate diners looking for bargain-priced burgers.
“Even though I don’t love the business model, I need an outlet for agents who want it,” Schachter said.
He acknowledges that 100 percent companies make a powerful recruiting pitch. The numbers break down like this: Say an agent collects 3 percent for representing one party in a $300,000 sale. With a 70-30 split of the $9,000 commission, the agent gets $6,300, the brokerage $2,700. In Realty One America’s arrangement, the agent pockets $8,901, the brokerage just $99.
“Unfortunately for guys like me who have a traditional brokerage, it’s really a challenging business model,” Schachter said. “It’s insanely cheap.”
It’s unclear whether consumers benefit from the rise of 100 percent companies. Because agents make more on each deal, they might be more willing to discount their commissions, which typically are 5 percent or 6 percent of the sale price.
Schachter isn’t the only traditional broker to reluctantly embrace the 100 percent concept. Myles Minns, owner of Continental Properties in West Palm Beach, a few years ago began offering agents a 100 percent commission.
“I didn’t do this because I chose to,” Minns said. “I did it because that’s what the market and the Internet made me do. The world has changed, and you have to adapt with the change. If you don’t, you’re going to be a dinosaur.”
Fewer than half his agents opt for 100 percent splits, Minns said. The rest prefer arrangements that are less generous but offer more support.
For now, brokers say, most agents will stick with traditional commission splits simply because they prefer the structure of a company with office hours and sales meetings.
“Most people are not jumping ship because of the ferocity of the competition in South Florida,” Schachter said. “You better be really confident in your abilities before you go to one of these 100 percent companies.”
In Horvit’s case, the trade-off made sense. He liked his previous broker’s posh office space, but he didn’t think it merited half his commission.
“I don’t think everybody’s going to go to (100 percent brokers),” Horvit said, “but it made economic sense for me.”
Palm Beach County’s biggest real estate brokers
Rank. Company: Agents*
1. Keyes Co.: 532
2. Coldwell Banker Residential Real Estate: 493
3. Illustrated Properties Real Estate: 457
4. United Realty Group: 382
5. Home Run Real Estate: 377
Source: Florida Department of Business and Professional Regulation
*As of March 12
For home sellers
Aents working in 100 percent companies stand to make more on each deal. So they have flexibility to discount their commissions, which typically are 5 percent or 6 percent of the sale price.