top of page

Redefining Brokerage Economics

The real estate industry is built on a complex system of fees, commissions, and independent contractor agreements. The structure of traditional brokerages drives up costs for consumers and keeps commissions high. With too many agents, too many fees, and a model that often prioritizes recruitment over quality service, most agents fail within their first three years. It’s time to break down these inefficiencies and understand why change is needed.

A Fractured System

In real estate, agents work as independent contractors, rarely collaborating for the benefit of the entire brokerage’s clientele. Hiring the best negotiator doesn’t mean you get access to the best marketer or designer—even if their desks are right next to each other. Despite brokerages often taking 35% or more of the commission, clients aren’t given access to their biggest asset: the collective experience and dedication of the entire team. Instead, you’re left with a fractured system where agents operate individually, and compete internally limiting the value you receive.

Suburb Houses
Suburban Homes

How Brokerages Really Make Money

Brokerage economics are simple: more agents, more sales, more revenue from commission splits. This system incentivizes brokerages to focus just as much—if not more—on recruiting agents as they do on marketing properties. The fancy office spaces, luxury amenities, and expensive events used to attract agents can cost a lot, which in turn keeps commissions high. The consumer often ends up paying for these recruitment efforts instead of seeing those dollars invested into effectively serving the interests of buyers and sellers.

Scarcity Keeping Commmissions High

With approximately 3 million licensed real estate agents in the U.S. and only 4.09 million homes sold in 2023, competition is intense. Because opportunities are scarce, agents are forced to maximize their earnings on each transaction just to stay afloat. This need to secure high commissions contributes to the industry's inflated costs, keeping fees high for consumers despite the low barriers to entry for agents. The result is a system where the scarcity of transactions drives up the cost of real estate services.

Suburban Street
Brick house
House For Sale Sign

Where that Commission Really Goes

Many consumers believe the commission they pay goes directly to the agent handling their transaction, but in reality, a large portion is divided among multiple parties. Referral fees, finder fees, paid lead services, and broker splits all take a share before the agent sees any earnings. Agents often earn only 15-40% of the net commission, and that’s before accounting for self-employed taxes and additional fees. With such small margins, agents have less money to invest in marketing or partnering with experts, and they often need to handle multiple deals at once just to make a livable wage, leaving less time to focus on each client.

Lawn Strip

Want to Learn More?

Click below to explore our blog posts on why commissions have remained high in real estate and how KRG is working to change that.

bottom of page