The way for Real Estate companies to make more money is to sell more homes . But of course they cannot increase the number of people who want to sell their homes so the only way to increase sales is to sell a larger proportion of those homes that do come on the market.

There are two sides to a real estate transaction, the Listing side and Selling side. The Listingside markets the home and the Selling side are the ones that found the buyer.

Like in any sales force some agents are far more succesful than others. Real estate companies try to poach the most succesful agents to switch to their company. And among the agents in particular the companies focus on recruiting the Listing agents rather than the Selling agents. The logic here is that no one knows who may find the buyer for the house but if you have the listing you dont care , you will make your money no matter who brings the buyer.

With this mindset at their monthly Real Estate meetings companies stare at some version of an Area Graph like a Pie Chart showing how a few agents have the majority of lisitngs and then brainstorming on how to recruit these agents.

But the truth of the matter is that these star Listing agents are not poachable. But the very reason that the star Listing agents are not poachable points to a way forward for focussed real estate companies. The majority of real estate agents work on a 50/50 split . This means that they and their company split the commision evenly. Star Listing agents on the other hand often work on a 70/30 split , that means that for every $100,000 in sales with a 4% commsion , with 2% going to the Selling side and 2% going to the Lising side, they get $1400 while the company they work for earns only $600. This is why the star agents are not poachable. They are already making as much commission as they can and new comapanies have nothing more to offer.

Agent Sale Price Commsion Split What Agent Nets What Company Nets
Star Agent 100000 70/30 1400 600
Average Agent 100000 50/50 2000 2000

As the Tree Map illustrates a small number of agents List about 1/3 of a typical suburban real estate market. But it turns out that each star listing agent has a group of Selling agents who sell the star listing agents homes. Year after year the same Selling agents will have the buyers for the same Listing agents. And while individually these Selling agents are not stars, enough of them gathered together can approximate the performance of a star Listing agent. A look at the table shows us that each time the Selling agent sells one of the star Listing agents homes the Selling agents comapany earns more than three times as much money.

As can be seen from the network graph above real estate transactions divide in clusters. Brix, Parisi ,Langone, Jenney, and Scuibba listings are sold by seperate teams of agents.

Lets look at two of them.

As one can see the two teams are largely independent. Lets looks at some actual numbers.

Type Commision.Split What.Agent.Recieved What.Company.Earned
Star Agent 70/30 867244 371676
Average Agent 50/50 619460 619460

Per listing the company will never make as much money as the star agent becasue the company is only getting 30% of the commision but by focusing their efforts on being on the other side of the star agent’s deals the focussed real estate company can make more money from the star agent than the star agents own company.