Exp Realty Review: Real-estate MLM with lots of fees
Exp Realty operates in the real-estate MLM niche. The company described itself as “the first cloud-based brokerage”.
Heading up Exp Realty is founder and CEO Glenn Sanford.
Sanford’s LinkedIn profile ties him to a number of real-estate and ecommerce ventures.
In addition to Exp Realty, Sanford (right) is Chief Strategy Officer of VirBela and CEO of eXp World Holdings.
VirBela has a platform they claim helps “move businesses forward while minimizing travel and person-to-person contact.”
Exp World Holdings claims it “develop(s) next generation Cloud-based organizations”.
Outside of Exp Realty, Glenn Sanford doesn’t appear to have any MLM experience.
Exp Realty’s Products
Exp Realty affiliates sell listed properties to clients.
A searchable property catalog with current stock is provided on Exp Realty’s website.
Exp Realty’s Compensation Plan
Exp Realty affiliates share an 80%/20% split with the company on commissions earned.
That is if you make $10,000 selling a property, you make $8000 and Exp Realty takes $2000.
This continues until $16,000 has been paid to Exp Realty over the course of a year.
If this $16,000 cap is reached, from that point on an affiliate keeps 100% of generated commissions for the rest of the year.
This is slightly misleading, as Exp Realty charges a $250 “transaction fee” after the $16,000 cap is reached.
Transaction fees cap out at $5000, after which the fee is lowered to $75 for the rest of the year.
The money Exp Realty takes funds the MLM side of the compensation plan.
Residual Commissions
Exp Realty pays residual commissions via a unilevel compensation structure.
A unilevel compensation structure places an affiliate at the top of a unilevel team, with every personally recruited affiliate placed directly under them (level 1):
If any level 1 affiliates recruit new affiliates, they are placed on level 2 of the original affiliate’s unilevel team.
If any level 2 affiliates recruit new affiliates, they are placed on level 3 and so on and so forth down a theoretical infinite number of levels.
Exp Realty caps payable unilevel team levels at seven:
- level 1 (personally recruited affiliates) – 3.5%
- level 2 – 4% (must recruit and maintain at least five qualified affiliates)
- level 3 – 2.5%% (must recruit and maintain at least ten qualified affiliates)
- level 4 – 1.5% (must recruit and maintain at least fifteen affiliates)
- level 5 – 1% (must recruit and maintain at least twenty affiliates)
- level 6 – 2.5% (must recruit and maintain at least twenty-five affiliates)
- level 7 – 5% (must recruit and maintain at least forty affiliates)
Note that for recruited affiliates to count towards the above qualification criteria, they must have made a sale within the last six months.
If this qualification criteria is not met, residual commissions are paid as follows:
- level 1 – 3.5%
- level 2 – 0.2%
- level 3 – 0.1%
- level 4 – 0.1%
- level 5 – 0.1%
- level 6 – 0.5%
- level 7 – 0.5%
The other caveat is that residual commissions are paid up until an affiliate has shared $16,000 with Exp Realty annually (from the 20% share).
Joining Exp Realty
Exp Realty affiliate membership is $149 and then $85 a month.
In addition to a $250/$75 transaction fee charged after the $16,000 cap is reached
- a $25 broker review fee and
- a $40 risk management fee (capped at $500 annually)
These fees are charged “per transaction”, which appears to be code for every commission earned (sale made = transaction).
Conclusion
Exp Realty seems pretty straight forward. You sell properties, you earn a commission.
Exp Realty takes some of that commission, keeps a percentage and funnels the rest into an MLM compensation plan.
I don’t think anyone is stocking up their garages with properties to qualify for commissions, so the majority of sales are practically guaranteed to be to retail buyers.
Two irks I have with Exp Realty’s compensation plan are fees and the recruitment requirements.
It’s pretty pie in the sky to expect Exp Realty affiliates to each recruit five affiliates, who’ve each made a sale in the last six months, just to qualify for second level unilevel team commissions.
No official figures are provided but I’d wager the majority of fee-paying Exp Realty affiliates haven’t met this criteria.
As for forty on the upper end, I get this is technically the highest commission tier but still. Recruiting forty affiliates who maintain a sale every six months seems like a tall ask.
Why not make this a group effort instead of pegging it to personal recruitment?
You’re basically gate keeping full commissions from the majority of Exp Realty affiliates, as statistically hardly anyone is going to reach forty qualified personal recruits.
Moving on to fees, there’s three fees charged “per transaction”. A $250 transaction fee, $25 broker review fee and $40 risk management fee.
Who are these fees paid to? If it’s Exp Realty, that’s just greedy. Do better.
Only briefly mentioned in Exp Realty’s compensation material is their equity plan.
I feel like this should be better clarified. From my understanding Exp Realty affiliates can opt to receive 5% of their 80% commission split as Exp Worldwide stock, at a 10% discount of whatever the stock is selling for.
Are these shares being sold by the company? And what about the “sustainable equity plan”. Is that on top of the 5% or part of it?
There’s nothing further about the ICON Agent Award in Exp Realty’s compensation documentation.
“Cultural goals” sounds like a potential red flag to me. I’d love to clarify but for some reason that information is withheld from consumers (a potential violation of the Securities and Exchange and FTC Acts).
Exp Realty is listed on NASDAQ as EXPI. You can look up the stock code to get current pricing.
As with any real-estate MLM opportunity, first and foremost you have to have a serious think about selling property. These aren’t nutritional shakes.
Do your research and compare Exp Realty’s commission rates and structure with other options. The company has been around for over a decade so on some level I’m assuming they’re competitive.
Property listings are available on Exp Realty’s website for consumers. Use that tool to check out what’s available in your area.
Exp Realty also promises to provide access to both live and archived training, so you’re not entirely on your own after paying fees.
If I was considering Exp Realty I’d probably ditch team building for the first six months and set a property sale goal.
If I didn’t meet that sale goal I’d accept Exp Realty isn’t for me and move on. Total cost outlay would be $574, which isn’t too bad.
If you find selling properties is a good fit for you, then and only then focus on building a team. Good luck!
Oz,
I was looking forward to your review of eXp Realty as I am an investor in the company. Disclosure: I am not a rep for eXp.
Actually, eXp is a combination of three models: Direct Sales, MLM and (to a lesser degree) Franchise.
In fact, when Glenn Sanford, CEO created the marketing plan, he borrowed the best of the Keller Williams model and specifically left out some of the problems – such as brick and mortar offices.
I doubt you (or anyone else for that matter) would consider Keller Williams an MLM but they do encourage referrals/recruiting by their agents as shown in this article which compares the two companies:
kylehandy.com/blog/exp/exp-realty-vs-keller-williams/
Taking a page from Keller Williams, Glenn realized how important profit-sharing was to Keller Williams’ massive growth. Glenn created eXp Realty “Revenue sharing.”
The fees can be explained as the cost for training and the exclusive cloud-based technology that gives eXp Realtors an advantage especially with how Covid changed the way we do business around the world.
Since eXp does pay out commissions on home sales on multiple levels, it does fall into the strict definition of MLM.
However, since I am not a fan of MLM (as my profile name suggest), I did a ton of research into EXPI prior to investing. I would call their compensation model an MLM-hybrid for several reasons:
1. The price to the products to the end-user is not jacked up to allow for multiple levels of compensation. Besides, that model is truly dead as the digital revolution is all about removing the middleman between the manufacturer and consumer.
Thus, almost every MLM ends up being a money game IE: Recruit to Sell.
2. The vast majority of new recruits to eXp are ALREADY licensed to sell real estate – not newbies. Here’s just one example of an entire Real Estate Agency that left Keller Williams to join eXp Realty:
inman.com/2021/04/02/major-keller-williams-team-in-utah-jumps-to-exp-realty/
3. eXp Realty has been in business for more than a decade and publicly traded. They currently have more than 50,000 agents and are doing business in 16 countries while adding 2-3 more every quarter.
50,000+ Agents: nasdaq.com/press-release/exp-realty-exceeds-50000-real-estate-agents-globally-following-record-breaking
Global Expansion: nasdaq.com/press-release/exp-continues-worldwide-expansion-announces-3-new-locations-for-second-quarter-of
4. eXp Realty does pay multiple levels but that is not always a bad thing. For example, in the insurance industry, it’s typical to have multiple levels of compensation between the carrier and the consumer.
The General Agency System is used by many captive carriers like New York Life and Northwestern Mutual. They have a Regional Vice President, Division Manager, District Manager and sometimes a Sales Manager that overrides the producer/agent. (I am not a fan of that model either btw)
eXp is agent-focused FIRST. This means the majority of their resources were created for the benefit of the Real Estate Agent who sells to the consumer.
What I found is this. The reason 50,000 realtors jointed eXp was not the multiple levels of income like the typical MLM.
What attracted them to eXp was the cloud-based model and ADDITIONAL compensation vs the typical Real Estate Agency that spends most of the agent override on brick and mortar office space and employee salaries.
A FEW FACTS:
A common commission split gives 60% to the agent and 40% to the broker, but the split could be 50/50, 60/40, 70/30, or whatever ratio the agent and broker agree on.
It is common for more experienced and top-producing agents to receive a larger percentage of the commission.
investopedia.com/articles/personal-finance/080714/how-do-real-estate-agents-get-paid.asp
Exp Realty, as you noted, pays 80-20 ($16,000 cap) with 80% going to the agent and half of the remaining 20% going to the “revenue sharing” side. Their top agents are called Icons and they receive the $16,000 back in the form of free stock.
Dare I say it? Think Blockbuster vs Netflix, right?
I see eXp as a cloud-based model for real estate agents cuts out MOST of the middleman costs and offers an attractive “revenue sharing” opportunity for agency builders.
5. Finally, not that it matters much to your readers, institutional investors on Wall Street apparently likes the eXp model too.
fintel.io/sos/us/expi It’s rare to see this type of institutional ownership of the typical MLM company.
Overall, I believe your review was fair and straight-forward (as usual).
So, is eXp Realty Group a typical MLM deal or not. I guess it’s like the old joke about “you say potato and I say potatoe”
Either way, I appreciate the chance to share my thoughts.
Full Disclosure: I am an investor – not a distributor. I would NEVER invest in the typical MLM company!
Putting down the the initial and monthly fee to training is far enough. But “cloud-based technology?”
Mate once it’s set up it’s done. The only thing left to do is update (if required). If anything cloud deployment reduces costs.
I still don’t get the need for $250 transaction fees and $40 risk management fees.
I read the reason for the fees but will need to go through my files and videos and will post their reasoning shortly.
I deal with this all the time in the insurance industry. The question is would you rather work on a 60/40 split with NO FEES or a 80/20 split with fees.
A simple calculation shows why so many realtors are leaving their brokerage firms in favor of the eXp Realty compensation plan.
The price of the average home in the USA is now $408,000. The extra 10 to 20% comp with eXp Realty more than makes up for the small fees associated with a real estate transaction.
Plus, eXp agents receive free stock and the right to purchase up to 5% of their comp in stock at a 10% discount.
There are realtors that joined in 2010 that have 7-figure stock portfolios because of this benefit (past results should not be considered as an indication of future returns).
RE/MAX pays out 95/5 but charges a rather hefty “desk fee”. One of their top agencies just left to join eXp Realty. I guess they understand the “fee structure” enough to make the best decision for themselves.
There is still only 100 pennies in each dollar and we all deal in the same currency. eXp appears to have a superior compensation plan compared to the other realty brokers.
Something must be working as eXp Realty, The Real Estate Cloud Brokerage, is the fastest-growing, global residential real estate company.
Again – Full Disclosure: I believe in the company as an investment and am not involved in the business.
Oz,
As it turns out, my memory about the fees was incorrect.
Apparently, there are no Transaction Fees until after the 20% reaches $16,000 which is referred to as the CAP.
Transaction Fee
Transactions 1-14 would be on an 80/20 split with NO transaction fee.
Transactions 15-35 would be on 100/0 split with a $250 transaction fee.
Transactions 36-60 would be on 100/0 split with a $75 transaction fee.
Risk Management Fee (Errors & Omissions)
Broker Review Fee
I went back and had a look at the marketing presentation. I didn’t read it as the $250 transaction fee only kicks in after the $16,000 cap has been reached – but I can see it now that it’s been pointed out.
I think that could be better presented by the company.
Not sure where those transactions numbers came from. Isn’t hitting $16,000 dependent on the size of the sales (transactions)?
I.e. you could do 18 cheap property sales and still not hit $16,000, putting you in the first bracket.
Agents might be familiar with “errors and omissions” but I’m not. Why is this passed onto affiliates?
I would think the average sale depends on the location. For example, here in Honolulu, the average price of a home is now $950,000 whereas in Las Vegas, it’s only $319,000. The national average just reached $400,000.
eXp uses a fixed cap of their 20% of $16,000 and not the number of units sold, which I believe is the better method. And, there are NO special deals from what I understand.
On the matter of “errors and omissions” I would think that practice is typical within the industry. I know in the insurance industry today, most carriers require E&O coverage prior to issuing a contract.
Real estate and Insurance agents are typically independent contractors and in business for themselves. We understand there are no free lunches so if a company “picks up the cost of something for ALL their agents” the top producers end up paying the cost for the low level producers. We refer to that as the 80/20 rule in sales where 20% of the agents produce 80% of the business.
Simply put – costs to manufacture and market a product have to be paid by someone. Those costs are paid by either the company, the consumer or the agent and in a competitive market, it’s typically NOT the consumer.
Thanks for making the changes to your initial review.
Aloha Oz,
I just checked my original post and couldn’t believe my eyes.
“I was looking forward to your review of eXp Realty as I am an investor in the company. Disclosure: I am a rep for eXp.”
I am NOT a rep for eXp. In fact, I’m not even a licensed real estate agent. I did state my interest was from an investor perspective but left out the “NOT” in my disclosure.
It really doesn’t matter but if you have a few minutes could you change the Disclosure to read “I am no a rep for eXp”
Thanks.
All good, done.