by Michele Newbern Gillis
Staff Writer
Can Exit make an entrance in the North Florida market? The company, with a philosophy akin to multi-level marketing successes like Mary Kay Cosmetics, is recruiting here and some local leaders aren’t entranced.
Exit Realty, which has been in business for five years, structures the company to allow agents and brokers to make money the conventional way, but they also can earn bonuses and “retirement benefits” when sponsoring new agents.
In addition to the residuals to the agents introducing new agents to the company, Exit Realty has more promises in their motto “We offer you more than 100 percent.”
“Everyone in the office can potentially earn more than 100 percent if they do what we want them to do,” said Steve Morris, Exit’s president, found and CEO. “The bonuses they get from sponsoring other people, plus their own commission, can add up to more than 100 percent.”
With a 70/30 split, the agent starts out with 70 percent commission, but if they sponsor four new agents at 10 percent apiece, that raises their commission split to 110 percent.
How does the head office make any money if it is always paying bonuses?
“There is always money there because the deal pays the money. We don’t pay,” said Morris.
Morris said that the reason he set the company up this way is to help retain agents.
“We teach them, train them and coach them,” said Morris. “The rest of the industry doesn’t do that and tends to lose people. If you are making 10 percent off of each agent you brought in, how do you walk away from that? How do you quit? This is designed to glue people to the operation. With regular real estate, a little flick of their Bic [lighter] and they can go any place they want. With this, they have to think twice before leaving.”
However, some local real estate executives are questioning the validity of Exit’s real estate recruitment methods.
“My only comment is that there is a bunch of smoke and mirrors in what they do. They promise a lot of downline money, but there are all kinds of ifs, ands and buts to get that money,” said Walter Williams, president of Coldwell Banker Walter Williams.
Dan Jones, president of ERA Dan Jones and Associates, agrees.
“Walter is right on target,” said Jones. “You have some people that will leave Watson Realty or Coldwell Banker Walter Williams and go to a new company because they think they are going to make a higher percentage of commission. Then, they find out they won’t get as much as they thought. Instead of getting a full commission, they get a discounted commission. Maybe it’s not what they thought it was when they joined. There are a lot of smoke and mirror deals out there.”
“They’ve never come to my presentations,” said Morris. “There’s smoke and mirrors in Keller Williams (another franchise real estate company in Jacksonville which has a recruitment program). I’ve gone right to the president and asked him their formula and he couldn’t tell me. There is no one in Keller Williams that will tell you anything about their formula. With this, we tell every number; there is not a bit of smoke and mirrors in any part of that. If they say that, then they haven’t investigated the slightest bit. They haven’t listened to a tape, a video, disk presentation or a live presentation. That is all b.s. That’s my comment back to them.”
Jones said that one of two things will happen with a setup like Exit’s.
He said sometimes it takes the new agents a while to get going. So, the agent may quit sponsoring new agents because they are not making any money. Or, when the new agents become so successful, they will leave and find their own deal elsewhere.
Jones said this is not a new concept and that his company tried it a long time ago.
“We used to call it Unit Leaders,” said Jones. “We started that in our company a long time ago, then we finally stopped it. There are some people that try this stuff and it would work for a while and then it goes away.”
Despite Exit Realty’s detractors, the numbers show that they are doing fairly well since they opened five years ago. At the close of 2001, over 200 franchises had been sold and over 2,000 salespeople recruited in Exit Realty nationwide.
Morris introduced the concept to about 80 members of the real estate community last month at the Marriott Southpoint.
The company has a single level concept where employed agents introduce new agents to the company. The agents are only paid on that recruit, not the downline recruits. The broker then recruits the agent and the residuals are paid by the home office to the agent who introduced the new agent to the company. And, the residual payments are paid from the head office, not by the agent recruited.
Each agent who sponsors a new agent receives 10 percent of that agent’s gross commission up to $10,000 from the Exit Realty head office. This is possible because there is a 70/30 commission split, (70 to the agent, 30 to the broker) when an agent starts with Exit Realty. After the new agent makes his/her first $100,000, the split changes to 90/10 and the residuals to the agent who brought them in stop as well for that year.
The next year it starts all over again.
The reason it starts over at 70/30 is because that is where the money indirectly comes from for residuals.
The money does not come directly from the agent making the money. When the deal closes and the broker receives their 30 percent, they forward 10 percent to the home office, a neutral company.
“It functions through us and we forward it on to the agent who brought in the sponsored agent in the first place,” said Morris. “When I presented my idea to the government, they said that is the only way they would approve it. We literally cleanse the money.”
Morris said when you bring in the agent, the natural thing to do is to mentor that agent because you have a vested interest in that agent’s success and longevity with company.
“We are setting up purposely to reduce that [agents jumping from company to company],” said Morris. “We know about that and our system is designed to help reduce that.”
The company does not charge desk fees, but they do charge annual dues of $195. In addition to that, agents pay a deal fee of $150 per real estate transaction up to 18 transactions.
According to Morris, the charge is automatically deducted off their paycheck until after the 18th transaction or they reach their $100,000 mark. Then they they don’t pay it any more.
“Once they make the $100,000, there are no more deal fees for that year,” said Morris. “We are looking for $2,700 maximum.”
Because the agents are independent contractors, they also pay their own advertising expenses. But, Morris said, if you are making $5,000 from residuals, that could help pay all your expenses.
“If you do our system the way it’s supposed to be done — sell real estate, but try to bring people in — you neutralize what have been headaches up to this point,” he said.
Exit Realty also offers a five percent bonus to people outside the real estate industry who introduce agents to Exit Realty.
“If you bring someone in and introduce them to an Exit Realty agent and they become part of Exit Realty, when they do a deal, there is still only 10 percent paid out,” said Morris. “We pay it to the agent who is sponsoring them and they pay you half.”
This company also offers retirement benefits that are contingent on the agents you sponsored staying with the company: if any you sponsored are still with the company when you retire, you get seven percent of their gross commission up to $7,000.
Since the company has only been around for five years, retirement hasn’t become an issue.
“We are sort of in the spring of our years, so to start talking about things that are literally in the winter of our years is not relevant,” said Morris.
But, he said, if someone joins tomorrow and brings someone in and then retires, they make 7 percent of that agent’s gross commission for as long as the new agent stays with the company.
Looking even further down the road, Exit Realty offers a beneficiary residual of 5 percent.
If an agent dies and is still collecting residuals from the agents they sponsored, their beneficiaries will receive 5 percent of the residual for as long as the sponsored agent stays with the company.