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Which is Best? Salary or Commission?

There is a lot of uproar in the real estate world about Zillow hiring agents as salaried workers rather than commissioned agents.  Redfin has been doing this for more than a decade and I first heard about it in 1988, so what Zillow is doing is not a revolutionary concept.

Is there a benefit to the consumer with either model?  For commissioned agents to be successful, they have to be self-motivated.  That can be a challenge but with the right office and personnel leadership these agents can be incredibly successful.  The big negative for the consumer is that sometimes commissioned agents will push them towards higher priced properties in order to get a higher commission.  Additionally, many commissioned agents aren’t motivated enough to make real estate a full time job because of the lack of security that comes with a steady paycheck and therefore commissioned agents often don’t stay current on regulatory updates and market trends.

What about salaried agents?  The majority of people prefer a steady and predictable paycheck where they have to show up at a given time and have a set list of tasks to perform during the day. Another significant advantage of being a salaried real estate agent is there is often a larger support team with other people doing unenviable tasks such as prospecting and marketing.  There is no question that salaried agents in general will not earn as much money as their commissioned peers but they get a steady pay check, more support and a generally easier work environment.  Salaried agents still have quotas to meet and are considered salespeople, so many of the sales-driven stereotypes still apply to these agents such as perhaps being a bit too pushy with a buyer on a perspective sale.

Ultimately, there are positives and negatives for each type of compensation whether it means that salaried agents often lower costs for the consumer or that a steady pay check isn’t always a motivator to help the consumer.  Different business models come and go in every industry and in real estate, salaried real estate agents isn’t new and isn’t going to lead to the end of commissioned agents either. Different personalities will thrive in both scenarios and we need to be at peace that neither compensation model is inherently better than the other.