What does CAPPING in the REAL ESTATE industry actually mean? What is Capping?
The term “capping” has been thrown around by many brokerages in the real estate industry. It sounds great but what does it really mean? Is it beneficial to all agents or only top producers? In this video Alexander Fazelani breaks down some capping brokerages and if it is beneficial for the common agent.
What is Capping?
Capping refers to a system in which real estate agents are rewarded with a higher commission split or a hundred percent commission once they reach a specified revenue threshold for their brokerage. Essentially, it is a performance-based benchmark that allows agents to earn more after they have contributed a certain amount of revenue to their company.
Several brokerages have implemented capping programs to motivate their agents and provide financial incentives. While there are numerous brokerages in the market, here are a few notable examples:
Exit Realty offers a capping incentive based on revenue generated. Though the specifics may vary, once an agent brings in a predetermined amount of revenue, such as $180,000, they may be upgraded to a higher commission split, such as a 90/10 split.
Keller Williams is widely recognized as a pioneer in the capping system. Agents at Keller Williams typically cap at $24,000 of Gross Commission Income (GCI). Once the company reaches this threshold, agents earn a hundred percent commission on all subsequent transactions.
EXP Realty, the brokerage the author is affiliated with, has its own capping structure. Agents cap at $16,000 of GCI, meaning any revenue earned beyond this amount is paid out at a hundred percent commission.
Importance of Capping
For Established Agents: Capping holds great significance for experienced agents who consistently close a significant number of deals. Achieving the capping threshold allows them to maximize their earnings by receiving a hundred percent commission. This incentivizes top producers and rewards their hard work and success in the industry.
For New Agents
While capping can be enticing, it may not be the top priority for new agents. Instead, new agents should focus on joining a brokerage that emphasizes mentorship, training, and support. Being part of a team or brokerage that nurtures their skills and provides opportunities to gain hands-on experience is crucial in the early stages of their career.
Choosing the Right Brokerage
When considering a brokerage, it is essential to evaluate various factors beyond capping. Blind loyalty should not be the primary motivation for joining a brokerage. Instead, agents should consider the following aspects:
Tools and Resources
Assess whether the brokerage provides the necessary tools and resources that align with your business model and goals. A comprehensive suite of tools can enhance your productivity and effectiveness as an agent
Culture and Values
Ensure that the brokerage's culture and values align with your own. A supportive and collaborative environment can foster growth and professional development