One of the most used terms in real estate is gross commission. But if you’re new, you probably don’t know what the term means or why it matters to you.
Since you’re an independent contractor, real estate agents typically earn income through commissions, known as Gross Commission Income (GCI).
GCI is the total amount of money an agent earns from a real estate transaction.
Agents receive this income after all expenses associated with the transaction have been deducted from the commission, such as advertising costs and fees for services provided by other professionals involved in the sale.
It is essential to understand how GCI is calculated to accurately track and report income for tax purposes.
GCI is calculated by taking the total commission received from a real estate transaction and subtracting any applicable expenses associated with the sale.
The resulting amount is then divided between the broker, agents, and other professionals involved in the transaction.
Depending on the commission split you agree with your broker, the broker will receive a large share of this income, while newer agents and other professionals receive a lesser amount. That’s not always the case, such as with a brokerage like EXP, but it comes down to your agreement with the broker.
GCI is typically reported as ordinary income on a real estate agent’s tax return.
This means that it is subject to the same rules and regulations as any other type of income, such as wages, salary, or interest income.
Additionally, agents need to keep accurate records of their GCI to ensure they accurately track and report their income for tax purposes.
Why Is GCI important?
Understanding why GCI is essential for real estate agents because it measures their productivity and profitability. The higher your GCI, the more sales commissions and revenue you generate, which is an overall indicator of your business growth.
Also, GCI can be used to track progress over time, compare performance to other agents, and set goals for the future. That insight will allow you to analyze what is working from previous years versus what is occurring for the current year.
In some instances, GCI can also be used to negotiate salaries and commissions with brokerages, giving you more leverage when dealing with your current broker or looking for a more beneficial arrangement elsewhere.
How Does GCI Differ From Other Types of Real Estate Revenue?
GCI, or Gross Commission Income, differs from other real estate revenue types, including transaction fees, marketing expenses, and auxiliary services. In general, your GCI is the overall income from a commission, while your “Net” is the amount of your GCI minus the expenses like transaction fees and broker splits.
Understanding the difference between GCI and other sources of revenue can help agents and brokers make informed decisions about their business and financial outcomes.
Sources of Income
Real estate agents and brokers have various sources of income, including commissions, transaction fees, and auxiliary services.
Commissions are the primary source of income for most agents and brokers. A commission is a percentage of the property's sale price paid to the agent or broker after a successful transaction.
Transaction fees, on the other hand, are charges incurred for the services provided during a property transaction.
Auxiliary services such as mortgage brokerage, legal services, and property management provide agents and brokers with additional sources of revenue.
Transaction Fees
Transaction fees are different from GCI because they are usually a fixed amount charged for a specific service. Unlike commissions, transaction fees are not directly tied to the property's sale price.
For example, a real estate agent may charge a flat fee for a notary service or a property appraisal. While transaction fees can add to an agent or broker's revenue stream, they typically do not make up a significant portion of their income.
Marketing Expenses
Marketing expenses are another revenue stream used by real estate agents and brokers.
Marketing expenses refer to the cost of advertising and other promotional activities that aim to attract potential clients.
However, marketing expenses are typically viewed as a cost of doing business and not revenue.
For example, an agent may spend thousands of dollars on online ads, billboards, or other promotional materials, but these expenses are not part of their GCI.
Auxiliary Services
Auxiliary services in real estate refer to additional services agents and brokers provide.
These services include property management, mortgage brokerage, legal, and home inspection services. You could also categorize other professional services like real estate coaching as an auxiliary service you pay or are paid for.
These services revenue is not part of the agent's or broker's GCI. While auxiliary services can provide additional sources of revenue, they are not typically the primary source of income for most agents and brokers.
Commission Splits
A commission split refers to the percentage of the total commission that an agent or broker receives after a successful transaction.
The commission split varies depending on the brokerage firm and the agent's agreement with the firm. This split directly affects an agent's GCI, as a higher percentage split means a higher GCI.
What Is A Typical GCI For A Real Estate Agent?
In some areas, a typical agent will see a GCI in the $45-50,000 range. However, it varies depending on several factors, including experience, market conditions, and the agent's marketing and sales skills.
However, as a general rule, a successful real estate agent should earn at least $100,000 in GCI annually.
Factors That Affect Gross Commission Income
The factors that affect GCI can significantly vary depending on the market, individual agents, brokerage fees, and auxiliary services. Finding different ways to make income from your real estate business will increase your GCI and, in some cases, help to improve your Net while lowering your expenses.
How To Increase GCI
As a key performance indicator for real estate companies, GCI represents a revenue stream that can be optimized through a combination of innovative business practices, individual agents' performance, and effective marketing strategies.
Increasing your GCI will require short- and long-term strategic thinking and decisive action.
The most ideal way to get organized and create systems to help alleviate any overwhelm that may come with adding more tasks to an already busy schedule is to invest in hiring a professional coach to help guide you–more on that later.
But if you want to increase your GCI and make your business more profitable, here are some practical tips and strategies to help you achieve your financial goals.
These tips include:
- Listing more properties. The more properties an agent lists, the more potential there is for commissions.
- Selling properties for a higher price. Even a slight increase in the sale price of a property can result in a significant rise in GCI.
- Reducing expenses. Real estate agents can save money by negotiating lower fees with their brokerages, using low-cost marketing strategies, and avoiding unnecessary costs.
- Specializing in a particular market segment. Agents specializing in a specific market segment, such as luxury homes or first-time homebuyers, can often command higher commissions.
- Build a strong network of contacts. The more people you know who buy or sell homes, the more likely you will get listings and referrals.
- Become an expert in your market. The more knowledgeable you are about the local real estate market, the better equipped you will be to help your clients buy or sell their homes.
- Provide excellent customer service. Happy clients are more likely to refer their friends and family to you, which can lead to more business.
Investing In A Real Estate Coaching Program or Mentor
Investing in a coaching program or mentor is a great place to start if you want to improve your GCI in real estate. GCI stands for “gross commission income,” which is the amount of money an agent earns from transactions before any expenses are deducted.
Working with a coach can help you identify areas of strength and weaknesses in your business and develop tailored plans and winning strategies to grow your GCI consistently.
One of the primary benefits of working with a coach is identifying areas for expansion that you may have yet to consider. Your coach will help you conduct a SWOT analysis highlighting what you do well, areas that need your attention, and holes in the marketplace that you can try to fill.
A coach's expertise and guidance can help you explore different niches and opportunities that may lead to increased revenue streams. They can also help you develop a marketing plan to attract clients and grow your revenue potential.
In addition to identifying new opportunities and creating a marketing plan, a coach can help you improve your personal performance by providing strategies and techniques that work best for you.
For example, a coach can offer advice on effectively negotiating with clients or creating an effective sales process and provide feedback on your performance to help you identify improvement areas and make informed decisions about your business.
Investing in a real estate coaching program or mentor can lead to significant financial outcomes for your business.
By consistently implementing winning strategies and developing your skills, you can expect to see an increase in your GCI over a period of time.
While an upfront cost may be associated with studying with a coach, the long-term benefits of working with one are well worth the investment.
So if you want to improve your GCI in real estate, consider investing in a coaching program or mentor to help you succeed.
And if you are looking into how to increase and grow your real estate career year-over-year and make a stable income from real estate is in part due to understanding GCI and making achievable steps that you can do for your real estate business to thrive.
