Corcoran Group toughens clawbacks for departing agents

In letters to former agents, firm demands repayment of certain commissions and marketing bills
By E.B. Solomont | April 25, 2019 02:00PM

Corcoran is demanding reimbursement of certain commission and marketing dollars (Credit: iStock)

Corcoran is demanding reimbursement of certain commission and marketing dollars (Credit: iStock)

Stung by agent losses, the Corcoran Group has tightened its clawback policy for agents who leave the firm.

Earlier this month, the Realogy-owned firm sent letters to at least a half-dozen agents in Brooklyn, demanding reimbursement of certain commission and marketing dollars. “We understand that you may have overlooked your obligation during your transition period, but payment must now be made,” read one such letter reviewed by The Real Deal. The letter threatens legal action if payment isn’t received within 10 days.

The demands stem from a change to Corcoran’s policy handbook, dated Dec. 5, 2018, which states: “To the extent an agent… is paid at a Commission Split in excess of what is provided for herein, any such amounts paid during the last eighteen months of the agent’s association shall be reimbursed by the dissociating agent.”

A Corcoran spokesperson declined to comment on the firm’s internal policies.

Nearly every firm in New York has some kind of clawback policy — allowing brokerages to recoup marketing dollars, bonuses or assistant salaries if an agent leaves the firm. Many have tightened those policies (or at least tightened enforcement) in recent years, too, amid a hyper-competitive recruiting environment.

But Corcoran’s new policy relates to already-paid commissions. The new policy states that the firm may recoup commission paid to agents who have earned higher-than-typical splits — an increasingly-popular tactic firms use to try to recruit and retain agents. (Compass, for example, has been accused by rivals of offering lavish signing bonuses and high splits to new agents.)

Ex-Corcoran agents who spoke to TRD on the condition of anonymity said they got bills during the second week in April for amounts ranging from $20,000 to $100,000, seeking reimbursement of commission they earned months earlier and in some cases, a year ago. “If I earned that commission split while I was at Corcoran, how can you say once I leave the firm I owe you money for something I earned?” said one agent, who requested anonymity for fear of being targeted by a lawsuit.

But a source at the brokerage, who also requested anonymity in order to discuss an internal company policy, said in many cases agents shop their offers around and negotiate higher splits based on the promise that they will stay at a firm.

Like other firms, Corcoran pays departing agents a reduced commission split of 40 percent for pending deals, according to the policy manual. Agents who leave must also repay out-of-pocket expenses that were advanced but not used.

Douglas Elliman, Halstead, Brown Harris Stevens and even Compass have similar policies. “Everyone has some form of it,” said one brokerage head. “Firms shouldn’t punish agents if they leave, but if agents really do spend a lot of marketing dollars, is it sufficient for the firm to be paid back? Sure.”

Another former Corcoran agent — who did not dispute the company’s right to recoup marketing and other expenses — said by going after commissions the firm was challenging the underpinning of agents’ independent contractor status. “It’s the whole purpose of why we get into this industry, because we have the ability to go where you choose,” the agent said. “They’re trying to alleviate that; that’s the crux of this entire matter.”

Between the end of 2017 and April 18, 2019, 148 agents left Corcoran, according to TRD‘s analysis of real estate licenses. Of the 148, 79 left real estate altogether. Another 32 went to Compass, 10 went to Douglas Elliman and four went to Stribling (which was acquired by Compass earlier this month.)

Overall, Realogy shelled out $52 million in commissions during 2018’s fourth quarter. The company’s average commission payout is close to 73 percent, up from 68 percent several years ago.