Some Real Estate Agents Work Under a Desk Fee Arrangement
All real estate agents must work under a real estate broker's license. An agent's license doesn't allow them to work independently, and getting that license in the first place depends on having the sponsorship of a brokerage. A broker retains part of the agent's commission or, in some cases, charges the agent a desk fee as the cost of doing business.
Agents who want to work independently often get their broker's license rather than an agent salesperson's license.
What Is a Desk Fee?
A desk fee is a payment agreement between a real estate agent and their broker. It's an alternative to splitting commissions between the agent and the broker, or they might agree to a combination of a desk fee and a commission split.
A desk fee is charged by the broker monthly for providing office space and a desk to the agent. It might not be the only fee charged by the broker.
It's common for real estate agents to pay their employing brokers a desk fee when the broker agrees to give the agent 100% of the commission earned by the brokerage on behalf of the agent's efforts.
How Much Are Desk Fees?
Desk fees can vary, but they're generally a flat fee—an agreed upon rate for operating either in the broker's office, under the broker's license, or both. The fee might be higher or lower if an agent wants a private office, or if they work from home so they don't literally have a physical desk at the broker's office.
Real estate brokers are responsible for the actions of their respective real estate agents. Desk fees don't relieve the broker of that responsibility.
Some desk fees paid by agents to their brokers are capped at a maximum amount. The broker isn't entitled to any more money for the remainder of the year once the agent has paid in that amount. These fees can run as much as $2,000 a month, and agents still typically have to pay for their own signage and advertising.
The broker earns income from the actions of the agents through either fees or commissions. This money is necessary to defray the costs of maintaining the office space, office operations, office staff, advertising, insurance, computers, website, internet, telephones, affiliation costs, licensing, and other expenses.
Desk Fee vs. Commission Split
A real estate agent must decide whether to sign with a broker who charges a desk fee, a commission split, or some combination of the two, and it's not a simple decision. A commission split might be preferable if you don't have a lot of cash flow from sales. You would have less expense until you begin to develop clients and make sales.
A commission split might be preferable in a slow real estate market when sales are few and far between. The split could be as much as 50% to 80% to a commercial real estate broker, according to the National Association of Real Estate Advisors.
A desk fee can look like a bargain compared with splitting commissions when you have more frequent sales. This can pencil out in a hot real estate market where commissions are adding up.
You might want to look for a broker who offers both models or combinations of a desk fee and commission split. You can then renegotiate or switch models with the same broker if the need arises. Or you might begin to look for a different broker to sign with depending on the market and your ability to close sales if a combination arrangement isn't available.
Is It Worth It to Change Brokers?
Although there are many other factors involved with determining which broker you should sign with, the fee structure is one important element to consider.
Some brokers offer wildly attractive desk fee packages to lure agents from one firm to another. The brokerages might throw in other perks such as free "For Sale" signs, free business cards, or access to certain types of technology without cost. These perks might have an expiration date, however. If something sounds too good to be true, it might be for only a few years.
Ask about company policy before switching brokerages. Consider things that are most important to you: business support, leadership, and teamwork. Moving from one brokerage to another can be costly and it often wastes a lot of time that could be spent selling real estate and earning an income instead. Changing brokers can be confusing to your clients as well.