What Does Capping Mean in the Real Estate Industry?

Understanding Commission Structures at Keller Williams Realty


If you’ve ever wondered about the commission pay-outs for agents at Keller Williams Realty, let’s dive into the concept of capping and how it works. As a former Team Leader at the Olathe, Kansas branch of Keller Williams Realty, Diamond Partners, Inc., I’ll use our cap structure as an example. However, it’s important to note that each KW franchise has the authority to set their own cap amounts. If you’re part of a team or group, it’s best to reach out to me or a local Team Leader for a more detailed explanation.

The Cap Amount

For a “single” agent at KW Diamond Partners in Olathe, our cap amount is set at $18,000, with an additional franchise royalty of $3,000 payable to KW in Austin, TX. These figures are crucial as we delve deeper into the commission structure.

Olathe Keller Williams

Understanding Commission Distribution

With every successful sale, whether it’s on the buyer or seller side, you’ll earn a commission that has been agreed upon within the MLS. This commission is then paid to our brokerage, KWR, Diamond Partners, Inc., and subsequently divided as follows:

  • 6% is remitted to KW in Austin
  • 30% remains with our local market center in Olathe
  • 64% is allocated to you, the agent

This distribution pattern continues until you reach the cap amount of $21,000 (including the $18,000 cap and the $3,000 franchise royalty). In our Olathe housing market, this typically equates to selling approximately $2.2 million in homes, which translates to around 12-14 house sales per year.

See also  How to Become a Real Estate Agent in Oregon

The Significance of Capping

While many agents never reach their cap due to being part-time or not achieving the $2.2 million sales threshold, numerous agents do cap. Some agents accomplish this feat in the 12th month of their fiscal year, while others achieve it in different timeframes. We recently had an agent who capped within just 76 days of their fiscal year. But why is capping important?

Once you hit the cap, you retain 100% of the commissions earned without any limits until your anniversary date. In other words, you get to keep every cent you earn once you’ve paid in your cap amount of $21,000 ($18,000 + $3,000).

Another Illustration

Let’s consider a hypothetical scenario: You’re a high-production agent who generated $20 million in sales volume last year, with an average commission of 3.0%. If we apply the cap numbers mentioned earlier ($21,000), you effectively operated on a 96.5/3.5 commission split with KW.

Connect with Us

If you’re interested in learning more about Keller Williams Realty, regardless of your location, don’t hesitate to reach out to me via email, leave a comment, or give me a call. I’m passionate about this company and our location, and I’d be delighted to offer consultation on whether pursuing a real estate career with us—or any other company—is the right fit for you. Remember, real estate can be financially rewarding, but it also comes with its fair share of challenges. I look forward to talking to you.

Have a business. Have a life.

Garrity Traina
Chris Lengquist
Teaching | Speaking | Coaching
KWR, Diamond Partners, Inc
13671 S Murlen Rd Olathe, KS 66062

See also  How to Obtain a Real Estate License in Kansas