Seattle-based, tech-enabled brokerage releases 2017 report on agent compensation and benefits
Seattle-based online real estate brokerage Redfin today released its 2017 Agent Compensation Report, which outlines how much Redfin agents earn compared to the rest of their industry counterparts, as well as other benefits of working for the company.
According to the report, Redfin agents who worked nine months or more in 2017 earned a median income, which includes salary, bonuses and stock-based compensation, of $90,166.
That amounts to $46,541 (107 percent) more than traditional real estate agents — which Redfin defines as “independent contractors working solely on commission” — who closed between 3 and 150 deals in the same markets Redfin serves, according to a Redfin analysis. Redfin agents in the 85th percentile earned an average yearly income of $153,017 — $33,031 more than their counterparts in the same percentile ($119,986).
In addition, Redfin says it spends an average of $20,000 per agent per year on benefits and expenses such as “comprehensive healthcare coverage, paid vacation and parental leave, payroll taxes for Medicare and Social Security, licensing, association and MLS dues and fees, continuing education, mileage reimbursement, equipment including laptops and printers and mobile service.”
Lastly, Redfin claims to save its agents money on advertising and lead generation tools, since Redfin agents connect with buyers and sellers through the Redfin app.
“The only way to deliver the best service is to employ the best agents,” said Redfin CEO Glenn Kelman in a press release. “At every Redfin board meeting, the first issue we address is what Redfin is doing to be the best employer in real estate. Every year we try to get better, through investments in technology, support staff and culture, but also by paying people well.”
Here’s how Redfin described its methodology for calculating the income of non-Redfin agents:
Non-Redfin Agent Pay: Using MLS data, we first summed individual agents’ sales volume from January 2017 through December 2017. We excluded agents who closed fewer than three home sales in the year, assuming they were part-time or new agents. We also excluded agents who closed more than 150 deals in the year assuming they were offering a limited service, representing a bank, or leading a team, with whom the agent would share commissions.
We then estimated gross commission by multiplying sales volume by 2.56 percent commission based on 2016 data from RealTrends, which estimated an average combined commission of 5.12 percent. We then calculated an 80 percent/20 percent brokerage split. There are a variety of broker/agent arrangements, however, the National Association of Realtors says that most agents had a commission-split structure with their broker. While commission splits vary, we assumed an 80/20 split, with the agent receiving 80 percent of the gross commission, and the brokerage receiving 20 percent. This is a generous assumption, given that Realogy, the largest U.S. real estate company, estimated its average commission split would be approximately 70/30 in 2017.
Median expenses by income, as reported by the National Association of Realtors 2017 Member Profile in the table below, were subtracted from gross commissions to generate net commission estimates for each agent. Non-Redfin agent compensation percentiles were then computed on net commission estimates.
Article by Marian McPherson