Is eXp Realty a Pyramid Scheme?

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So, you’ve seen eXp Realty everywhere in the last few years. Maybe you’ve had a few friends get into real estate and join the brokerage. Maybe someone closer to you like a partner or even a family member. Yet, you still have some questions about this new real estate model. Is eXp Realty a pyramid scheme? A multi-level marketing company? A Scam?

A Quick Intro to eXp Realty

Founded by Glenn Sanford in 2009

Glenn Sanford, founder and CEO at eXp Realty, left Keller Williams in 2009 to start eXp Realty as the housing market took a massive hit. Prior to this move, he had led multiple different teams at the brokerage and knew there was something better to be created.

First Ever Cloud-Based Brokerage

eXp Realty is an innovative cloud-based brokerage that is changing the way agents are compensated in real estate! By eliminating the traditional bricks-and-mortar office structure, they dramatically lower costs – and share that additional revenue by distributing money back to the agents who help the company grow.

What’s a Pyramid Scheme?

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.

Multiple Types of Pyramid Schemes

Naked Pyramid Scheme

In a naked pyramid scheme, participants charge recruits a fee to participate in an “investment opportunity” claimed to return a large lump sum once the recruit finds enough new members. In this scheme, there is no product or service being sold, only the opportunity to profit by recruiting new participants.The product-based scheme differs from the naked scheme because, as its name hints, the scheme typically uses the sale of a product or service to mask its true nature.

Product-Based Scheme

In product-based schemes, new participants typically purchase a starter-kit or pay an initiation fee in order to become a distributor for the product or service. However, participants do not profit by selling the product, which is typically difficult to sell and yields narrow profit margins. Instead, participants profit by recruiting new participants who also pay to join the scheme.

What’s a Multi-Level Marketing Company?

A multi-level marketing company, or a MLM Company, usually offers a compensation plan that pays out to participants only from two potential revenue streams. The first is paid out from commissions of sales made by the participants directly to their own retail customers. The second is paid out from commissions based upon the wholesale purchases made by other distributors below the participant who have recruited those other participants into the MLM; in the organizational hierarchy of MLMs, these participants are referred to as one’s down line distributors.

How is an MLM Company Different from a Pyramid Scheme?

These two setups can be completely different or very similar. An MLM Company can definitely Pyramid schemes focus on recruiting other salespeople, MLM companies focus on selling products. Multi-level marketing companies concentrate on rewarding recruiters if and when they sell a product or manage a team. Managers get a percentage of each of their recruits’ sales.

Is eXp Realty a Multi-Level Marketing Company?

eXp Realty is not an MLM Company, however, it does offer compensation plans and benefits in a similar way. This is through the revenue sharing program they’ve pioneered in which agents make a commission on the agents they’ve sponsored at eXp. In other words, when someone they’ve introduced to eXp Realty sells a home, the agent that sponsored them will make a small piece of that. Fortunately for eXp Realty, this is just one of the many ways to increase your revenue at the company.

ANYTHING TO SAY?

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