AccountTECH study of Top Producing Real Estate Agents - Are they worth it?

BOSTON, Jan. 21, 2025 /PRNewswire/ -- 

Introduction

In a groundbreaking study analyzing six-years of financial performance of residential real estate brokerages, AccountTECH has uncovered striking insights into the vast disparities in retained company dollar income generated by agents across different productivity levels. After analyzing data from 57,641 agents and 2,368,941 closings between 2019 and 2024, this comprehensive study sheds light on the monumental impact of top-decile agents and the often-overlooked revenue contributions of agents on teams in the bottom decile. For brokerage owners and operators, these findings present a compelling case for strategic focus on agent production levels and team performance metrics.

The Study: A Deep Dive into Productivity and Profitability

The study was performed by the data specialists at AccountTECH, a time-tested innovator of accounting software solutions for brokerages and franchisors. The research categorized agents into deciles based on their total sales volume each year, then extracted average retained company dollar for every Decile tier. The study included only productive agents from brokerages with multiple years of data available, ensuring robust and reliable insights. Key findings highlight:

• Top Decile Powerhouses: Agents in the highest decile generated exponentially more retained Company dollar income for brokerages compared to their lower-performing counterparts. In 2024, the average company dollar per agent in the 1st decile was $68,739. By contrast, agents in the 5th decile averaged $8.585, and those in the 9th decile averaged $1,943. These agents' contributions underscore the importance of attracting and retaining top producers.
  
  In the middle of the ranking, the agents in the deciles, 4th, 5th, 6th & 7th, contributed company dollar in a more narrow range - between $4,000 and $12,000 in 2024.
  
  For 2025 budgeting, one accurate approach would be for a company to create a decile matrix of its own agents. Using their own internal data for their matrix, any brokerage can calculate the likely company dollar revenue for each of their agents for 2025. The matrix would likely have a structure similar to results from our study.       

• The Overlooked 10th Decile: The agents in the 10th decile, traditionally perceived as the lowest performers - since they generally have received no credit for sales volume, reveal an under-valued income source for brokerages. These agents work on teams, with team leaders that claim full credit for sales volume - while giving team members most of the commission proceeds. Despite the lack of sales volume recognition, team member earnings deliver meaningful company dollars to brokerages. The earnings of team members in 2024 would rank this cohort in the 8th decile if credited appropriately.
  
  
• Cost of Labor and Transaction Management: While top-producing agents generate significant revenue, there are substantial labor costs associated with servicing and managing their transactions. In 2024, the median cost of labor for profitable real estate offices was $624 per side (or unit). ( note: median labor costs per unit were much higher in 2024 for un-profitable offices. see previous AccountTECH research on this topic )

• • For 1st decile agents, who closed an average of 44 sides in 2024, the total labor cost amounted to $27,227 per agent.
    
    
  • For 5th decile agents, closed an average of 5 sides in 2024, incurred $3,158 in labor costs.
    
    
  • Meanwhile, 9th decile agents closed an average of 1 side, resulting in $624 in labor costs per agent.

These figures significantly impact the net profitability of each agent. For instance, after considering the company wide labor cost per unit in 2024:

• • 1st decile agents generated company dollar of $68,739 with an associated labor cost of $27,228. This reduced annual Net Profit per agent to  $41,512 for these top producers.
    This highlights the need for careful cost analysis when evaluating high performers.
    
    
  • Conversely, 5th decile agents  returned company dollar of $8,585 with an associated labor cost of $3,158. This reduced Net Profit per agent to  $5,427 for this level of producer in 2024.

These nuances demonstrate the importance of balancing revenue with operational expenses to optimize profitability.

• Decline in Company Dollar Since 2021: Company dollar income peaked in 2021, but has since declined across all deciles. For example, in the 1st decile, the average company dollar per agent dropped from $86,401 in 2021 to $68,739 in 2024 - a decrease of $17,662 or 20%.
  
  The 5th decile saw a decline from $11,607 to $8,585, representing a 26% drop.
  
  While the 9th decile saw an increase from $1,654 in 2021 to $1,943 in 2024. This is a 17% increase in company dollar from these lowest producers. This may indicate that newer (or lower performing agents are accepting reduced commission split percentages).
  
  Overall, these declines in company dollar, from high producers, highlight the challenges brokerages face in maintaining profitability amid changing market dynamics.
  
  
• Extreme Variances in Income: The data exposes staggering income disparities, with the 1st decile agents delivering significantly higher retained company dollar income compared to those in lower deciles - even in the face of much higher associated labor costs. This disparity emphasizes the potential revenue gains from nurturing and incentivizing high performers.
  
  
• Most company dollar does not come from Top Producers: While the data clearly shows why brokerages should focus on recruiting high performers, the reality in 2024 shows that for most companies, most of their company dollar comes from agents closing between 0 - 10 sides per year.
  
  The table below shows which agent group produced the most company dollar in 2024. These results show that for most companies, they make most of their income from lower producing agents.
  
  Which agent group produced the most company dollar for companies in our study

Implications for Real Estate Brokerages

This study provides actionable insights for brokerage leaders:

• Strategic Recruitment and Retention: Focusing on recruiting high-producing agents and creating retention strategies tailored to their needs can significantly enhance profitability.
  
  
• Reevaluating Team Structures: Recognizing the financial contributions of team-based agents in the 10th decile and exploring ways to incentivize the growth of teams can unlock untapped revenue potential.
  
  
• Factoring Labor Costs: Brokerages must integrate labor costs into their valuation of agent contributions. For example, if a top-decile agent closes 50 units annually, their transactions in 2024 would likely incur $31,200 in labor costs alone, emphasizing the need to weigh revenue against operational expenses.
  
  
• Consider Labor costs in Compensation Models: In 2024, the labor cost associated with transactions for high producing agents consumed 40% of the company dollar earned by 1st decile real estate agents.
  
  Developing compensation models that reimburse brokers for the high labor costs associated with top producers is critical to sustaining long-term brokerage profitability. In lieu of commission plan re-negotiations, the only other option for brokerages is to dramatically reduce brokerage labor costs through more efficient technology or low-cost outsourced labor.

Conclusion

For real estate brokerage owners and operators, these findings serve as a wake-up call to revisit traditional performance metrics and compensation practices. The ability to identify, reward, and leverage the contributions of both high-performing individual agents and team-based agents can transform the financial trajectory of any brokerage. The study's revelations highlight not only the value of top decile performers but also the often unseen contributions of those operating behind the scenes. By considering labor costs and incentivizing efficiency, brokerages can build a roadmap to maximizing profitability in an increasingly competitive real estate landscape.

More information

For AccountTECH clients, you can reach out to support and get this complete Company dollar analysis report with all the specifics of ranges and margins for each decile.

AccountTECH will be hosting a live public webinar to discuss the results of this study before the end of January. You can reach out to our the staff to get an invitation to the webinar by sending your request to [email protected]

AccountTECH   www.accounttech.com   (978) 947-3600

For sales inquiries, please contact: 
Theresa Hurt   [email protected]
(978) 710-0071

Media contact:
Rizza Batol
[email protected]
978.710.0071

SOURCE AccountTECH