Why is the channel partner commission in the wholesale house and land industry a fixed dollar amount?
In the wholesale house and land industry, channel partner commissions are usually set as a fixed dollar amount (e.g., $25,000–$40,000 per package) rather than a percentage. This approach is intentional and driven by several key factors:
1. Price Control and Consistency
- Fixed commissions allow developers and builders to standardise pricing across different sales partners.
- It prevents channel partners from inflating the price or seeking a higher margin based on price fluctuations.
- Ensures retail price to buyers stays competitive and aligns with valuation expectations.
2. Investor-Focused Market Norms
- Most wholesale packages target property investors, who expect transparent, fixed pricing.
- Investors don’t like seeing percentage-based commission structures—it raises red flags.
- A fixed commission protects trust in the product and the channel.
3. Predictability for Builders and Developers
- Fixed amounts help builders budget more accurately when working with large networks of aggregators and marketers.
- It’s built into the feasibility model and P&L from the beginning.
4. Avoiding Inflation of Land/Build Prices
- A percentage-based commission (e.g., 5%) would incentivise higher package pricing, which may:
- Push valuations above lender limits
- Cause settlement issues
- Make packages less attractive to investors doing ROI/rental yield calculations.
5. Level Playing Field for Channel Partners
- Keeps things fair—each partner earns the same reward per sale, regardless of how experienced they are or how good their sales tactics are.
- Encourages volume over mark-up.