City Connections offers new commission option

By Sara Polsky | August 21, 2009 06:41PM

City Connections Realty has become the latest New York City firm to change its commission structure. The brokerage will now offer sales agents the option of receiving between 65 and 85 percent commissions, marketing support and no desk fees.

The firm will also hang onto its current commission model, which offers agents 90 percent of the commission on transactions in exchange for a monthly desk fee of $825 for agents who choose to work remotely, or between $1,000 and $1,325 for agents who want to be based in the office in a “very large cubicle,” said Brian Huang, the company’s sales manager.

The new commission structure is part of an aggressive recruiting campaign for City Connections, Huang said. According to the City Connections Web site, the company currently has nearly 100 agents.

“I’m guessing…they’re hoping to increase their agent count and make their money on the volume,” said Kathy Braddock, a partner at Charles Rutenberg Realty, which launched in New York City with a similar model in 2006.

Under City Connections’ new model, the commission starts at 70 percent for agents with their own listings and 65 percent for a deal in which the agent represents the buyer. The commission can increase up to 85 percent based on production, Huang said.

If an agent maintains an office desk for $1,325 per month and sells more than $1.325 million in exclusives in a given year, the 90 percent model would generate a larger paycheck than a 70 percent one. For less than $1.325 million in real estate, agents with a 70 percent split would fare better.

“If you are making money, you are doing deals…it makes sense to do the desk fee,” Huang said. But “some agents don’t feel confident enough to do [$1,325] a month [for the desk fee] and do the higher split.”

The traditional commission model allows residential agents to keep half of an average 6 percent commission, with the other half going to the company. The firm in turn pays expenses such as marketing and training.

City Connections is not the first firm to alter its commission structure this year. In February, William B. May transitioned to a model in which brokers can receive 100 percent of their commissions in exchange for a one-time fee of $1,500 plus a monthly $500 fee.

Rutenburg’s Braddock said she thinks her firm’s implementation of the 100 percent commission structure has led other firms to re-evaluate the way they do commissions, although City Connections moved into its 90 percent commission model in 2004.

“The old commission structure is basically dead in many industries,” not just real estate, she said.

RE/MAX pioneered the high-split commission structure nationwide in the 1970s, allowing brokers to keep 100 percent of the sales commission but charging them a fee and expenses.