eXp Realty is the largest real estate company in the United States. With over 60,000 agents and recently recorded revenue of $609,000, it seems that the question should be, “How could this be a pyramid scheme?” But when you take a closer look at the truth, the answer suddenly becomes less clear-cut.
This article will cover what is known about the company’s business model and whether or not it can be considered a pyramid scheme. Hopefully, we will help you make a more informed decision whether to join or not.
What is a Pyramid Scheme?
There is no singular definition of the term “pyramid scheme.” The most popular and accepted one is the so-called Ponzi or Madoff schemes, characterized by a high return on those who invest early but spiraling returns for latecomers.
These scams rely upon an ever-expanding pool of new investors to fund the operation. As more people buy-in, the original members receive their investments with little effort other than showing up at the office door.
If you’re not familiar with these types of scams, just ask Bernie Madoff’s victims how much they made from investing earlier.
This is what Google says, “A form of investment (illegal in the U.S. and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.”
There are two types of pyramid schemes: Naked Pyramid Scheme and Product-based pyramid scheme.
Naked Pyramid Scheme
A naked pyramid scheme is the most common type of fraud. In these schemes, the recruiter offers a product or investment with the promise that the promoter will make money.
But the recruiters at the bottom have no opportunity to profit from their recruitment efforts. The schemes are based on constantly recruiting new members without selling any products to non-members.
There is a constant flow of money going up the pyramid with little or no investment coming down the chain. These schemes are illegal in many places as they violate laws against fraud by promising false returns on investments or income-generating activities.
This means that eXp Realty could easily be thought of as one of these scams if we don’t look at the other aspects of their business model.
Product-based Pyramid Scheme
Product-based pyramid schemes involve selling a legitimate service such as franchise rights for people outside your network. As such, it requires significant cash investments upfront (with promises that those who come later can recoup their costs). Although it involves some tangible goods in the sale, still the basic premise is one person recruited equals one sale made.
Are Pyramid Schemes legal?
The law in the United States is unambiguous on the legality of pyramid schemes. In the case where the company pays commissions to its agents for recruiting new members, the U.S. Federal Trade Commission (FTC) has ruled that such a scheme is illegal and it would be subject to an injunction under Section 17200 of the California Penal Code punishable by civil penalties or imprisonment.
The FTC also states, “Pyramid schemes are illegal because they promise consumers or investors large profits based primarily on recruiting others to join their program rather than based on real sales of goods or services.”
Under U.S. federal law, pyramid trades are considered synonymous, which means just like the sin of selling church offices, but instead the sale of the intangible right of participation in a money-making venture.
Multi-Level Marketing vs. Pyramid Schemes
Whereas a pyramid scheme is illegal, there is another model of business that is the same type of model, but the difference is the business has a product. This is called multi-level marketing (MLM).
A multi-level marketing company is an organization that employs the principles of multi-level marketing to sell its products directly or indirectly to consumers without the need for retail outlets.
It usually compensates the recruiters and salespeople by paying them a percentage of their recruits’ sales and other bonuses such as prizes or trips based on performance.
Another name for MLMs is “network marketing.” A typical example would be Avon, where they have representatives worldwide selling their beauty products door-to-door and online via websites like avonshop.com.
The key difference is the company has a product to sell, and the recruiter doesn’t get commissions for recruiting people into the program.
What are the key differences between a Pyramid Scheme and Multi-Level Marketing?
The key differences between the pyramid scheme and the MLM lie on how they pay their people and whether or not there’s a product involved. The commissions they pay their recruiters/salespeople and how much time it takes for one person recruited equals one sale made.
In a pyramid scheme, the recruiter gets paid for recruiting people into the program with no product being sold, which is illegal in most places. In contrast, an MLM pays its salespeople based on recruitment numbers but not commissioning other’s recruits.
There is a tangible good involved in MLM as well; the difference here is that these companies have something more than just a joining fee before getting any returns from them.
Also, in a pyramid scheme, the company profits the most from the number of new people recruited. The people at the top are making money from those they have recruited to recruit more.
Where does eXp Realty fall, under Pyramid Scheme or MLM?
Let us try to understand how MLMs work and what eXp does. Understanding eXp Realty should start here. eXp Realty is not the same as any other company.
They have an entirely different business model involving recruiting people to sell their products and make money on commission and bonuses from selling more. The person at the top makes the most profit and recruits agents below them responsible for recruiting even more people beneath them.
This organization may be thought of as a multi-level marketing company because the business seems so. To understand this, let us look at some factors that make an MLM. Three components are the most important factors to consider when determining if a company is an MLM:
- First, the company must have products or services to sell.
- Second, the company must not make most of its income from selling the products or services to customers.
- Third, the people who join the MLM must be independent contractors and have the opportunity to profit in proportion with the amount that they sell.
Market Sharing in Business
Another term you need to understand when explaining the truth about eXp Realty is market sharing. Market sharing is the process of paying the independent contractors based on the number and size of their recruits. Market sharing can be found in MLMs.
The gaming industry is one place where the idea of the market sharing process has been used for a long time. In the 1980s, Electronic Arts (E.A.) was the first company to use this strategy in the gaming industry.
Now it’s common knowledge that any successful game will increase sales with word-of-mouth marketing from people who play it.
Reasons Companies Use Market Sharing:
There are several reasons the real estate industry uses the market-sharing technique. The most obvious reason is to reduce the competition in the local area and allow the company to have a larger share of the market than others. The other reasons are also about getting an edge on the competition, such as:
- Establishing long-lasting relationships with agents so that they represent only one company instead of many different ones.
- Creating more lead opportunities for team members by making it easier for them to get referrals from other agents or brokers who work within the same office space.
- Providing incentives for people to opt into programs where they can be financially rewarded if they refer new clients through their network (usually called “referrals”).
Apart from these, many companies have discovered that rewarding employees with the opportunity to make money as a market-share partner can be an effective tool for both the company and the employees.
Revenue Share in Real Estate
When you join eXp Realty as a new agent, understand that you will share the company stock. You also have free access to all the facilities that would help you increase your real estate sales.
This is one benefit of market share in the real estate industry. When the company is doing well, you will also gain from the profitable share that the company has set aside for everyone who participates in the program.
It’s not just about generating leads and closing deals; it’s a partnership of people working together on something they all want – success.
Let’s now look at what eXp Realty is. eXp Realty is a part of a publicly-traded company EXPI that provides real estate agents with the opportunity to make money. The idea is simple, and the truth about the truth, as it turns out, is very enticing:
- There are no fees for agents who work under this arrangement.
- All of the training materials are provided by eXp Realty free of charge.
- There are no inventory requirements because there isn’t an actual product to sell, like houses or condos; instead, you simply refer potential customers through your network to one of the many brokers represented by eXp Realty to help them buy homes.
- Agents are compensated for the referrals made by the brokers they recommend to potential customers.
- There is no limit to the amount of money an agent can make, which means there’s a lot less risk involved in this type of business model.
eXp Realty has had significant success with its rapidly growing network, and the company continues to expand into new markets every day.
That’s because eXp Realty offers agents a chance that only comes around once in a lifetime – the opportunity to work on their own terms as entrepreneurs rather than employees who have little control over how much they earn each year.
This freedom isn’t something most people get offered often, so it’s not surprising that many real estate agents choose the eXp Realty opportunity.
Selling real estate products can be pretty daunting and may not be as beneficial as many may think. However, because it’s publicly traded, eXp allows an eXp agent to take part in equity ownership and the company’s success.
eXp Global Reach 2021
eXp World Holdings aims to have eXp Realty agents in the top 100 cities in the world by 2021. This is a big undertaking, but it’s something that they are striving to achieve and trying for every day.
One benefit of joining the eXp World team is that becoming a successful real estate agent is easy. You’re just selling another product in the industry instead of starting your own business or franchise like other companies.
With this, all agents have access to free marketing tools such as blogging platform WordPress, sales video templates, and training materials at their fingertips.
A new real estate agent working for eXp is exposed to the business model the moment they start. This provides the opportunity to understand the eXp Realty business and have the chance to ask questions about how it works before making any commitments.
As an agent, you can choose your path with eXp Global Reach, such as setting up a commission structure or choosing which price points in the market are worth investing in. Because of this strategy, you get more profit potential by joining the company early on when there is less competition for buyers and clients.
How do eXp Agents Earn?
eXp is a real estate brokerage company with the eXp Realty business model. Agents can earn money in the following ways:
- Sell real estate properties for the buyer (commission based)
- Referring clients to other agents for any purchase or sale (profit share and commission based)
- Becoming a mentor, trainer, leader, or director of the company’s network.
When it comes to the real estate business, having proper connections and resources can help the agent find suitable properties to sell. That is one of the main reasons anyone would want to be part of this team.
Agents also get a free eXp Realty business website to promote their listings and brand the way they want and Facebook marketing tools for lead generation like the Likes&Leads campaign.
Agent Recruitment Commission and Referral commission
Another good way to earn at eXp Realty is to recruit agents, and the more you recruit, the higher the commission.
You can do this by the following methods:
- Refer the recruit to the company by submitting the form on the eXp website.
- Inviting them with a personal message and link sent via email or social media.
- Introducing them through in-person meetings at events, conferences, seminars, etc. (exp event).
The commission is $500 for the first agent recruited, and then $100 per additional one brought onto the team up to five agents referred from your team. The commissions are paid out monthly if you have reached the minimum of three qualified agents that month.
This provides an opportunity for everyone interested in real estate business ownership but doesn’t want to take full responsibility for their own venture. Agents get started immediately after registration. The sooner they start making money, the quicker they’ll be able to pay off their training.
At eXp Realty, the focus is on the individual and how they can offer opportunities to become successful in this business.
What you need to join the eXp Realty Community
To join the eXp Realty Community, you’ll need to be 18 years old and have the following qualifications:
- Completed the registration form
- Paid the $150 fee for joining the community
- The ability to meet the company’s standards concerning website listings or other social media content. This includes compliance with local laws that are applicable in your country of residence and where we operate.
- The regulations will need a real estate license for new agents for the following states:
- New York
eXp Referral Programs
It is not uncommon for real estate companies to offer the opportunity to earn commission on the sale of other products or services such as real estate brokerage, mortgage loans, insurance, and more. But eXp Realty agents are only required to focus on one product that stands out from the rest.
Agents have the potential to make money by investing their time and creativity into eXp Realty’s website listings and social media content without having any up-front costs. This means that they can build a business that isn’t solely reliant on recruiting others.
It’s because they’re not paying anything upfront and could be making income off this strategy. They can also save some extra cash if there is another job outside of being an agent. Consequently, this would reduce the temptation to recruit others.
Here are some examples considered a pyramid scheme:
When opportunity relies heavily on recruiting others but offers little or no production value to them outside of selling products themselves, anyone who doesn’t recruit will never make money off the system regardless if they work hard and try as much as possible or not.
This is because the money goes to the recruiting people and their recruits through the same structure.
The company only offers one product to its members. This is a problem when the company’s success relies solely on recruiting new members for its income stream instead of selling products or services that offer value.
Anyone who doesn’t want to be recruited would never make any money off this business model no matter how hard they work. It’s because there’s not much more than recruitment offered without having their own membership.
This means other distributors are making all the sales rather than them, even if it takes years longer before they can get out from underneath someone else’s pyramid scheme.
What other companies have a similar business model as eXp Realty?
eXp Realty’s business model is a unique one in the real estate industry. Other companies have similar business models, but eXp Realty is the most popular one because of its options to agents and the quality of service it offers.
Keller Williams has a commission-based structure with no price points on marketing materials or services. Whereas others may argue that Gary Keller is the only one benefiting from the company, the truth is that the more agents you refer to the company, the higher your commission will be.
Coldwell has a profit-sharing model which offers an upfront percentage of the commissions earned by the agent each month. Agents need to have at least $400 in earnings every year before getting paid for their monthly income, and some regions require agents to earn $500 per week or $1000 per month first.
There are also other considerations such as meeting quality standards on website listings/social media content, etc.
This real estate brokerage chain operates under the same idea as Keller Williams’. Still, there’s no upfront compensation for recruits, so building commission-based team members into the company with higher commission rates can take time.
This is the parent company of eXp Realty and the other companies mentioned above.
Century21 doesn’t have a service or product cost for their agent’s membership but instead charges them an annual fee with no other options available. This means they don’t make money unless they are selling real estate themselves.
Agents will need to rely on outside sources to generate revenue streams to meet the needs of their business properly, such as sourcing leads online or through networking events where they can promote the company.
So, what is eXp Realty then?
In our opinion, eXp Realty is neither a pyramid scheme nor an MLM. The company reserves the right to keep their business model type for the industry confidential. It is then our job as agents and potential recruits to educate ourselves on all aspects of the eXp Realty Community before we decide if this could be the right choice for us or not.
You may want to classify it as an MLM company due to the commission-based structure the company offers and the fact that other agents recruit agents.
However, not everyone thinks it’s such a company either. Even if they did not offer revenue share, eXp Realty would still be a choice for many agents.
It has beaten most companies in this industry for their commitment to helping agents grow.
If you thought eXp does not have an office, well, they have. Its virtual office is more advanced than what any other brokerage offers.
Here are some pieces of evidence that show eXp Realty is not a Pyramid Scheme:
- The company has the support of the government in the countries it operates in.
- The company supports the American Association of Real Estate Brokers (AAREB) and the National Association of Realtors (NAR).
- The company is a part of the Better Business Bureau with an A+ rating. This is the highest the company can get, and it’s a big deal for experienced agents.
- It was the first real estate brokerage to be accredited with the Better Business Bureau and the only one in the industry verified as a safe business by the BBB.
- The company is not facing any lawsuits or investigations from the courts over pyramid schemes or fraud, which other companies like Enron have faced for years after their collapse.
- Agents are not required to pay anything upfront. They only need to invest their time, energy, and creativity into the marketing materials for eXp Realty’s website listings or social media content. The commission will compensate for this later when they have met certain milestones set out by the company that we can’t discuss openly due to confidentiality reasons. These milestones include hitting $500 per week/month in commissions earned or meeting quality standards.
- They are hiring more agents than they have openings, which shows that the business is growing.
- There’s an average salary for eXp Realty agents, and the income reported on the website isn’t exaggerated, so there may be room to grow with this company, at least in terms of their growth potential.
- The company has reported an average agent’s income increase of 50% before and after the recession in revenue growth.
- There are also many other incentives offered to eXp Realty agents. These include the opportunity for promotion, bonuses, a guaranteed 12-month salary every year if you stay with the company for at least one year, which is not seen often from companies like Keller Williams or Century 21.
- There are many testimonials from happy people on the website, and they have videos that show the benefits of being an agent for this company.
- They don’t offer financial incentives or bonuses if you recruit others into the system. This is often seen as a red flag because money is then going towards recruitment instead of investing back in members who’ve shown interest in partnering with them.
Because of these reasons, eXp Realty is more of a brokerage company than an MLM or a pyramid scheme. As the country’s largest and fastest-growing real estate brokerage, eXp Realty understands that its agents routinely have to work hard to attract new customers.
That’s why it offers various competitive benefits across the real estate board: access to business intelligence reports, monthly revenue shares for top performers, and profit share incentives.
And, as one of America’s most innovative businesses with presence in 14 countries worldwide, exp Realty is looking for individuals who are passionate about leading their own company like themselves.
Benefits of Joining eXp Realty
With eXp, agents own the company and have many advantages. Agents have ownership of their brand while building a successful business with no franchise fees or desk fees.
Here are other benefits:
eXp Training is designed for all levels of experience, so it’s perfect for those who want to grow their skills no matter how much time they’ve been an agent.
The sessions offer various topics such as social media marketing tips, online advertising strategies, video tutorials on listing homes that sell faster than others, or techniques for closing more deals from start to finish.
Weekly training sessions
eXp agents are introduced to weekly training programs that offer updates in the real estate industry and the latest business tactics.
Its online course offers an interactive platform to help agents grow their businesses through e-learning, video tutorials, live workshops, and more. Agents can use the program to continuously enhance their knowledge of the real estate business best practices and expertise in using the various eXp Realty tools.
Leads Generation Toolkits
The company provides these with prewritten scripts specifically designed to reach out to potential customers interested in buying or selling homes from them. They come loaded with call lists of leads, saving time and energy when looking for new opportunities.
Community Events & Meetings
The events offered to allow eXp agents to network with other real estate professionals and build their businesses while making new friends in the industry.
Working with a successful team to discover open houses and market your company is easy with eXp Realty. They offer access to all the marketing resources you need, plus live support for all your questions.
This is the best way to accelerate your success by learning from the top agents and leadership. Agents who are committed will be able to get access to in-person or online coaching sessions that can help them overcome the challenges of the real estate industry with a plan specifically tailored for their needs.
Opportunities to earn from different sources
With eXp Realty, you can earn from different sources. Agents can make the most of the eXp Network, which is a comprehensive online and offline marketing platform that helps them attract new customers.
There are plenty of ways agents can make money with this opportunity, such as commissions from transactions or rental income generated from listing homes for rent if the agent does not have time to list properties on their own.
eXp Realty is a company that has been operating for over a decade and has a global reach that includes the US, Canada, UK, and other parts of the world. The company’s stock price has been steadily increasing since it was founded in 2009, with many different countries now on board to use their success model.
Executives and users of eXp Realty believe that it is not a pyramid scheme. If this does not sound convincing, please investigate further.
Revenue share is only one part of the opportunity at eXp Realty – not even the most important. You have every reason to trust and join the team. Their live support and other factors assure maximum benefits for every agent.
If you have any more questions about the company and whether it’s good for you, don’t hesitate to reach out.