Is eXp Realty a Pyramid Scheme?

There’s been a lot of confusion about eXp Realty revenue share and quite frankly, it’s based on misinformation, lack of understanding and/or lack of honesty. Here we will discuss the “eXp Realty is a pyramid scheme” myth, then we’ll go over MLM and the concept behind eXp Realty revenue share.

What does a pyramid scheme look like? Oxford definition – “A form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.”

Also… Both Ponzi schemes and pyramids are quite seductive because they may be able to deliver a high rate of return to a few early investors for a short period of time. Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever – At eXp Realty or the real estate industry as a whole, the growth is perpetual as agents get older and retire while new agents enter the market every day, but like any business opportunity, timing is important. Loyalty or seniority often brings better opportunities. As I’ll mention several times, eXp Realty is limited to 7 tiers so over time the growth will be spread out far, wide and deep.  

Does eXp Realty model resemble a pyramid? Show me any USA corporation that doesn’t look like a pyramid from top to bottom. If anything, eXp turned the pyramid on its head because large portions of the revenue are going to those who created it (its agents), plus consider eXp organizations are limited to 7 tiers (not top to bottom). I’m my opinion, eXp Realty has a progressive approach to its model where they’ve basically turned the traditional brokerage on its head.

Well if eXp Realty isn’t a pyramid is it MLM? I’m sure you’ve heard of MLM companies Amway, Mary Kay, Herbalife among many others. 
Multi-Level Marketing is a model in which a person (as a “seller”) buys a certain amount of product from a “distributor”, and then sells for a profit. The seller must then kick back some of his profit to his distributor. In turn, all the other sellers this person has recruited and distributes product to must kick back some of their profits to him.

Please pay attention to this point. Typically, MLM companies require full retail prices to the public while incentifying buyers to become distributors allowing them to purchase at a discount and also become recruiters which further cut their cost for the product(often getting it free) plus potentially making residual income from others in their “downline”. Usually, a LARGE upfront investment is required to purchase the product and more often than not the people in MLM lose money in the end because of their monthly fees. Not to mention shrinking cabinet space. Of course, in any business that requires selling, you will lose money if you don’t sell, but usually in a MLM if you don’t build a downline you will never make money. MLM looks nothing like eXp Rev Share program.

From wiki:

“Revenue sharing is the distribution of revenue, that is the total amount of income generated by the sale of goods and services among the stakeholders or contributors. It should not be confused with profit shares, in which scheme only the profit is shared, i.e., the revenue left over after costs have been removed, nor with stock shares, which may be bought and sold and whose value may fluctuate. “

“Revenue shares are often used in industries such as game development, wherein a studio lacks sufficient capital or investment to pay upfront, or in instances when a studio or company wishes to share the risks and rewards with its team members. Revenue shares allow the stakeholders to realize returns as soon as revenue is earned before any costs are deducted.”

Keller Williams has an almost identical model to eXp in that it has 7 tiers just like eXp Realty except they pay profit share rather than revenue share. What does that mean? Profit share means a portion of the net proceeds go to agents after all expenses have been taken out, but believe me, the revenue they create isn’t disappearing in thin air. It’s going to the top brass, recruiters, trainers, market centers, franchise owners, brick and mortar, insurance, taxes, power bills, new shiny widgets, on and on. The image below was taken from KW site a little while back explaining why their model isn’t an MLM. eXp Realty is the same reasons.

Why is eXp Realty different? The founder of eXp and the CEO of eXp World Holdings Glenn Sanford decided to create a model or concept of revenue share to organically grow his brokerage. It’s becoming more and more commonplace as companies become more progressive in giving back to their employees. A concept where he took a national brokerage corporate structure and put it into a cloud environment, saving vast sums of money, then transferring a portion of that savings to agents in the form of a revenue share system which then incentivizes the agents to attract others, in turn, saving more money by not having to hire recruiters and trainers. By incentivizing agents through Rev Share and Stock Ownership, eXp created a natural environment of COLLABORATION using the eXp World to train and share ideas with others which helps everyone grow in real estate transactions and agent attraction.

In summation, Rev Share doesn’t increase the cost of doing business, especially if you’re an ICON agent at eXp. eXp Realty’s sustainable model requires eXp to make at least 50% of all revenue generated. Think about it this way, half of your revenue goes to agents responsible directly or indirectly for you being at eXp Realty, but it also gives you the opportunity to build something meaningful. I was offered the chance to invest in a KW franchise over 12 years ago, but when I looked at the hard numbers and what was required to open the office I decided not to do it. I currently have 64 agents in my organization in 6 states and it grows every month, without spending one cent and I have zero liability. Now with better quality agents also joining now because the model is finally getting real attention, I can look back and be thankful for not overthinking the model and realizing its full potential.

Call Phillip for questions