After a few years of successful, legal business in the real estate industry, eXp Realty still regularly fields questions like is eXp Realty a pyramid scheme or a MLM business because of its progressive approach to real estate. Whether or not you agree with the business model, it is important to understand how it works and the differences between eXp Realty and illegal pyramid schemes that reward only those at the top.
The realtors at eXp Realty are not being duped into unrealistic promises of wealth with little work. They are provided with a real, legitimate opportunity to have a long, prosperous, and successful career in the real estate industry.
The real estate industry first took notice of eXp Realty in 2016 when we began to make a dent in the community. The market attempted to label our unique approach to conducting real estate business, and some pigeonholed the methodology as an illegal pyramid scheme or multi-level marketing. Only after a comprehensive look at the eXp Realty way can you fully understand that the revenue sharing compensation technique is a pioneering strategy that is completely legal and ethical.
What is Revenue Sharing?
Companies offer revenue sharing options to get employees invested in the organization and make them responsible for the business’s success. The real estate revenue sharing model allows companies to grow without excessive overhead expenses using a virtual office that takes advantage of the latest conferencing and communication technology tools.
Unlike the franchise model, the brokers and agents at eXp Realty are not strapped with franchises or regions to buy and sell. Savings are used to share revenue and help the company grow. When an eXp Realty agent recruits another agent to the company, the revenue generated by the new agent is shared with the original for as long as both are working for the company. The revenue share can go as deep as seven tiers of recruited tiers.
What is a Pyramid Scheme?
A pyramid scheme is a recruitment-based investment with individual participants generating revenue by expanding the recruiting strategy in width and depth. Some pyramid schemes involve a product, while others have no product to sell, and commissions are made solely by recruiting other participants. Pyramid schemes are illegal in the United States and other parts of the world.
The following breaks down the two basic types of pyramid schemes.
Naked Pyramid Scheme
Participants do not have to market or sell any products to earn money. They simply have to recruit other people to invest. Aside from ethical issues, the problem with a “naked” pyramid scheme is that eventually, the market is saturated. There is no way for the people at the bottom of the pyramid to make back their initial outlay, let alone to see profits of any kind.
Product-Based Pyramid Scheme
The difference with a product-based pyramid scheme is that new participants typically purchase a starter kit with a range of product lines to sell to the public. The person that recruited the new member gets a cut of their starter kit fee. Like a naked pyramid scheme, those who join late will enter into the investment in a saturated market that will make it challenging to sell products or recruit new people.
What is Multi-Level Marketing?
Participants of multi-level marketing (MLM) companies like Amway and Mary Kay have encouraged friends and family to join their distribution downlines. Existing members are paid a percentage of the sales made by recruited distributors and the people they recruit.
The difference between multi-level marketing and a pyramid scheme is that the focus of MLM companies is the product, while pyramid schemes are based on recruiting others. MLM salespeople are rewarded for higher sales or the ability to successfully manage a sales team.
eXp Realty clearly does not run an illegal pyramid scheme, but their techniques and process have some qualities of an MLM company that legitimately sells real products.
How Does eXp Realty Work?
First and foremost, eXp Realty is a real estate brokerage company. The revenue sharing compensation model is similar to an MLM investment in that brokers recruit other brokers and share in their revenue. Agents at eXp Realty pay an $85 monthly fee and work on an 80/20 split of their commission with a $16,000 cap. Fees go towards offsetting valuable resource tools such as kvCORE, Skyslope, eXp World, Workplace by Facebook, etc.
eXp World Holdings (EXPI) is a publicly-traded stock on the Nasdaq stock exchange and is audited by the United States Securities and Exchange Commission (SEC). With over 20,000 real estate agents, eXp Realty has brokers in all 50 states and most Canada provinces.
Agents at eXp Realty have the unique chance in equity ownership opportunism that can substantially increase their revenue and profit over time. Incentives include the acquisition of stock after the sale of the first home of the year, bringing on new agents, and additional stock options when a recruit sells their first home.
High-producing agents are rewarded with the return of their entire $16,000 cap as company stock upon completing specific benchmarks. An equity program that acts similarly to a 401k savings account allows agents the chance to purchase eXp stock discounted 20 percent from its trade price at the time.
What Makes eXp Realty Different?
Glenn Sanford, the founder of eXp and the CEO of eXp World Holdings, created a revenue share concept to apply to real estate that organically grew the company by allowing his employees to control the operation and reap the benefits. The existing national brokerage model was lifted to the digital cloud-based environment. Some of the massive savings from eliminating traditional brick-and-mortar stores and the overhead that comes with them were passed along to the brokers and agents that generate the business.
The revenue share system provides incentives for existing agents to attract and recruit additional talent for the team, saving the company even more money by not having to enlist professional recruiters and teams of trainers. The collaborative nature of the revenue sharing concept increases the sharing of ideas to make everyone better and improve the success of the overall business.
This sustainable model reduces the cost of business and creates agents with a vested interest in the company’s success and continued growth. While up to half of the revenue generated goes to agents that recruited you and the ones that recruited them, the eXp Realty model offers brokers to build a substantial base of revenue that can pay off for years to come. Agents can grow their businesses that build a foundation for the future without added expense or the weight of liability.
As the model continues to get attention within the community of progressive real estate brokers, the quality of the agents in the system will continue to improve, further stabilizing the market and the other brokers associated with eXp Realty.
Is eXp Realty a Pyramid Scheme, MLM, or Neither?
The bottom line is that eXp Realty is a legitimate realty business and not an illegal pyramid scheme. The intent is to further the success of the most talented and motivated real estate agents without bogging them down with franchise or regional requirements and without the company needing to establish and maintain a traditional physical location.
Some may feel they have a persuasive argument in classifying eXp Realty as a multi-level marketing company that deals in the real estate industry. However, there are too many differences and incentives to make money performing in the market to be a true MLM experience.
Agents are given the unprecedented opportunity to earn back their cap every year through company stock. They can also access the tools needed to grow and expand their business interests at an astoundingly affordable monthly volume rate.
It helps avoid labeling eXp Realty into any category other than a highly respected, award-winning real estate brokerage. The company was named the largest independent real estate brokerage in North America by transaction count in 2019 and continues to grow every year. Motivated real estate entrepreneurs can make a name for themselves and build a solid foundation for the future using available stock options and revenue sharing opportunities.
Why Choose eXp?
While much of the talk about eXp Realty may revolve around the notion of multi-level marketing and false accusations of a pyramid scheme, the revenue sharing component of eXp Realty is just one aspect that sets us apart from other realtors. Aside from how agents are compensated and how the revenue sharing concept works for both the company and the agents, eXp Realty is a real estate brokerage company that continues to do an incredible amount of business throughout the country.
Forget whatever you have heard about the way eXp Realty does business and treats its brokers. Get the facts and investigate for yourself, and you will find that eXp Realty is a legal, effective way for real estate brokers to succeed in today’s digital market.
Work with John Kinnunen: eXp Real Estate Agent
As a licensed eXp real estate agent in Florida and in Michigan with extensive experience in the field, I am eager to share my working knowledge of both the real estate industry as a whole and the exciting future of working for eXp Realty. If you’re already a real estate agent and looking to advance your career, or even if you’re interested in getting started in real estate, contact me today.
