Real Estate Brokerage or Pyramid Scheme?

While it is customary for real estate brokerage firms in California to provide their agents with a revenue sharing or profit-sharing component to their compensation package, there are some large real estate brokerage firms that focus on recruiting agents as opposed to focusing on assisting clients buy and sell real estate. Some of these companies have been labeled Pyramid Schemes because their profits are generated from fees paid by their agents as opposed to commissions generated from real estate sales and leasing. These companies charge exorbitant fees to their agents disguised as startup fees, desk fees, franchise fees, education fees, insurance fees, transaction fees, and other monthly fees. The more agents they recruit, the more fees they collect each month regardless of sales volume.

Agents need to be aware that some real estate brokerage firms are Pyramid Schemes or come dangerously close. If a company focuses heavily on recruiting others to join the company for a fee, be skeptical, because it is likely a pyramid scheme.



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