Is eXp Realty a Pyramid Scheme? The Truth About eXp Realty

Is eXp Realty a Pyramid Scheme? The Truth About eXp Realty

Are you looking into eXp Realty but unsure if you should make a move because you think it might be a pyramid scheme or multi-level marketing? Did a fellow real estate agent join the company, and now you see all sorts of recruiting messages from him or her? 

Since around 2016, when eXp Realty started gaining momentum, they’ve created a stir amongst the real estate agent community. Regardless of whether you are for or against what eXp Realty represents, it’s essential to know the full picture of the business model to decide whether to investigate further.

Hopefully, by the end of this post, you’ll know if eXp Realty is a pyramid scheme and also understand how eXp’s business model works. 

What is a Pyramid Scheme?

To answer the question of whether or not eXp Realty is a pyramid scheme, I think it’s necessary to define a pyramid scheme.  

Lexico defines it as “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.

two pieces of paper that read "illegal" and "legal"

Pyramid schemes are 100% recruiting-based. The pyramid scheme rewards individuals for recruiting others and paying out a commission for doing so. Two types of schemes have taken place in the past— “Product-based” and “Naked” pyramid schemes.

“Naked” Pyramid Scheme

The “Naked” pyramid scheme is where no individual sells products, and commissions are earned directly by recruiting others. It would look like this:

One person recruits ten other people to participate in this “investment opportunity.” The ten each pay the recruiter $100. The recruiter now tells them to go out and get 10 to do the same thing. If each recruit is successful, they each earn 0. $1000 for the ten recruits minus their initial $100 “investment.” 

Pretty easy to understand. But here’s where the issue is. Even if all 10 of those people were successful, they would have brought 100 people into this scheme. Those 100 would need to get 1000, and so on. Eventually, there will be a level when no one can make back their investment, and the entire pyramid topples.

“Product-based” Pyramid Scheme

The “Product-based” pyramid scheme works the same way but introduces a “product” that acts as the investment—a $500 starter kit or something similar. The recruiter then gets a percentage of the starter kit. Eventually, like the example above, the market is saturated with people trying to sell this same product. This saturation leads to people at the bottom being unable to earn back their initial investment, and the entire scheme collapses.

Pyramid Scheme vs. Multi-level Marketing (MLM) Company

We all know that a pyramid scheme is illegal, but what about another type of business model that gets a ton of criticism? A multi-level marketing business or “MLM”?

Multi-level marketing companies have been around for nearly a century. Almost everyone is familiar with some of the larger brands, including Amway, Mary Kay, Herbalife, Scentsy, Rodan + Fields, and Beachbody, to name a few. You’re among the few who multiple distributors haven’t approached to join one of these companies.

Investopedia defines multi-level marketing as “a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits’ sales. The recruits are the distributor’s “downline.” Distributors also make money through direct sales of products to customers. 

The main difference here is the intent. Pyramid schemes focus on recruiting other salespeople, and MLM companies focus on selling products. Multi-level marketing companies reward recruiters if and when they sell a product or manage a team. Managers get a percentage of each of their recruits’ sales.

So by these benchmarks, I think it’s safe to say eXp Realty is not a pyramid scheme. But is it a multi-level marketing company? Well, get into that next.

Is eXp Realty a Multi-level Marketing Company?

The answer to this question is yes and no. eXp Realty is a real estate brokerage first and foremost. It doesn’t fall into Wikipedia’s extensive list of multi-level marketing companies. That said, eXp has a form of MLM-type compensation called “Revenue Sharing.” This part gives eXp Realty the reputation that it is an MLM company. We’ll get more into what revenue sharing is later on. 

The bottom line, there are three components to an MLM company. First, the MLM company must sell a product or service. Second, an MLM company’s distributors earn income by selling the product or service. Third, distributors also receive income from recruiting other distributors who sell the product or service. Each MLM company’s exact compensation plan differs.

Keep this in mind when discussing revenue sharing in the next section.

What is Revenue Sharing?

eXp Realty offers a form of compensation to its agents and brokers called “Revenue Sharing.”  

Definition of Revenue Sharing

Wikipedia defines revenue sharing as “the distribution of revenue, the total income generated by selling 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.

A person holding one hundred dollar bills

Revenue shares are often used in game development industries, where a studio lacks sufficient capital or investment to pay upfront or 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.”

Why Do Companies Offer Revenue Sharing

Many businesses from different industries offer some form of revenue or profit share. Typically, companies that offer revenue share do so to incentivize quick growth without incurring much of the overhead seen otherwise. With revenue sharing, the company doesn’t need to spend nearly as much on marketing and hiring employees to help the company grow like a traditional one. Instead, they pay current employees or contractors based on performance for their contribution to the company’s growth.

Additionally, most companies find that when they reward employees or contractors for helping to find talent and grow the company, they often end up with a better, more qualified workforce.

Revenue Sharing at eXp Realty

Revenue Sharing is no different at eXp Realty. eXp Realty has significantly reduced its overhead compared to a traditional real estate brokerage. They do this by eliminating company-paid brick-and-mortar offices and hosting all company support and training in their virtual office, eXp World. Additionally, because eXp Realty is one real estate brokerage and not a franchise model, there are no regions or franchises to sell and pay for. These cost savings then translate into revenue share for eXp Realty agents helping to grow the company.

Revenue share at eXp Realty works like this. When you recruit an agent to the company, you share in the revenue that an agent brings in indefinitely as long as you and that agent are with the company. Additionally, if that agent attracts another agent to the company, you also share in that revenue. This benefit goes on for seven generations, or tiers. 

Check out my in-depth post on how eXp Realty Revenue Share works.

What is eXp Realty?

an audience at a exp realty event

eXp Realty is part of the publicly traded company eXp World Holdings (EXPI) on the Nasdaq stock exchange. eXp is audited by the SEC and is 100% completely legal.

eXp Realty was founded in 2009 by Glenn Sanford and is now home to over 20,000 real estate agents in all 50 US states and nearly all the Canadian provinces.

The eXp Realty commission split for agents is 80/20, with a $16,000 cap and pay an $85/month fee. This fee covers many tools and resources for agents to use in their real estate business. These tools include kvCORE, Skyslope, eXp World, Workplace by Facebook, and many more. 

Because eXp Realty is publicly traded, agents can participate in equity ownership opportunities. These opportunities include receiving stock whenever an agent sells their first home each year, caps or attracts an agent to the company, and that agent sells their first home.

Next, the ICON agent award program awards high-producing real estate agents their entire $16,000 cap back in the form of company stock once they meet a very attainable benchmark.  

Finally, eXp Realty offers equity similar almost to a 401k in that they allow agents to participate in a program whereby the agent can have 5% of their gross commission automatically purchase eXp stock at a 20% discount from its current trade price.

Similar Business Models in the Real Estate Industry

eXp Realty’s business model is unique but not the only one in the real estate world. Remember earlier when I mentioned our founder Glenn Sanford?

Glenn created eXp Realty in 2009 after beginning his real estate career at Keller Williams. Keller Williams, widely considered a fantastic real estate brokerage, also offers a compensation model similar to “Revenue Sharing” called “Profit-sharing,” which pays out seven tiers. 

Glenn took the idea of profit-sharing and took it a step further. He said that if we cut out the overhead, removed the franchise model, and all the middlemen, eXp Realty would be able to pay agents off the top in revenue share vs. after all expenses of the market center in profit share. 

an office conference room

Keller-Williams was formed in 1983, and 6 years later, in 1989 started to offer profit sharing to its agents. This profit-sharing quickly helped the company to grow to the level it’s at today, with over 150,000 agents.  

Early on, however, many in the real estate industry said the same things about Keller Williams as they do today about eXp Realty. But if you ask most agents their thought about Keller-Williams, not many would classify this brokerage as a pyramid scheme or even an MLM.

My Take: Is eXp Realty a Pyramid Scheme, MLM, or neither?

I hope this post will show you how eXp Realty is certainly not a pyramid scheme. Whether you classify it as a multi-level marketing company is up to you.  

I, for one, don’t classify eXp Realty as an MLM. Even if eXp Realty did not offer revenue share, the component that puts eXp into the discussion of MLM, I would still choose to hang my real estate license here for all the other benefits discussed above.

At no other brokerage would I, as a high-producing real estate agent, be able to earn my cap back every year in the form of company stock through the ICON program. Also, I could not gain access to kvCORE, Skyslope, and a huge private community of like-minded agents for just $85/month. These benefits alone far outweigh any other brokerage I’ve seen out there currently.

The Real Trends Five Hundred report for 2019 ranked eXp Realty as the #1 top-moving real estate brokerage by transaction count from 2017 to 2018. eXp Realty was just named the largest independent real estate brokerage in North America, by transaction count, for 2019.

a group of people working in an office

Because of this, I strongly feel eXp Realty is a real estate brokerage, not an MLM. It is a real estate brokerage that offers real estate entrepreneurs unique opportunities like stock and revenue share. But simply because the business model is unique and offers additional compensation opportunities doesn’t water down the fact that eXp Realty is a real estate brokerage and doing a lot of real estate business across the country!


In conclusion, eXp Realty is most certainly not a pyramid scheme. If you are researching eXp Realty and are turned off by something you may have heard or read, I encourage you to investigate further. Revenue share is a great opportunity, but it’s only one part of the opportunity at eXp Realty.

I would not let what others say about the model or company dictate what you ultimately decide to do with your real estate business. There is far too much at stake not to do your in-depth investigation into the company.

Kyle Handy

Would You Like To Partner With Me?

I’ve helped hundreds of real estate agents, team leaders, & brokers all over the country increase their sales, online presence, and create scalable systems. I would love the opportunity to work with you. Together, we can make this year your best yet!

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  1. “Revenue share at eXp Realty works like this. If and when you recruit an agent to the company, you share in the revenue that agent brings in indefinitely as long as you and that agent are with the company.”

    Literally the exact definition of an MLM. Everything else sounds cool, except this.

    I found the company myself, not through an agent first. I was keen enough to do my own research and become sold on the company myself. Let’s say I then join the company, after being “sponsored” by you: (a) you did nothing to close me on the opportunity, (b) I’m competent enough to learn everything on my own—you do not train me at all, and (c) I only want access to the cloud platform and training resources (again, to teach myself).

    Why do you deserve indefinite revenue share from my hustle, especially if I outperform you?

    That is also the other definition of nonsense.

    1. Hey Dan,
      Thanks for the comment! I understand what you’re saying.
      Wikipedia actually defines MLM as “a marketing strategy for the pyramid-selling of products and/or services. The profit of an MLM company is derived from the selling of the MLM company’s products/services by recruited MLM participants which constitute the MLM company’s non-salaried (unpaid) sales workforce”. I’d actually disagree that my explanation of revenue share mirrors this. In fact, many companies, outside of real estate offer real estate and are not considered an MLM. It’s simply a company strategy/perk to help incentivize internal growth.
      Regarding your last remark regarding who you name as your sponsor. You’re free to name whoever YOU choose. You should choose someone who you feel will be able to help you the most and who helped the most in your research. Nobody should “close” you on the opportunity so that is irrelevant for who. you name your sponsor.
      Just because you are competent enough doesn’t mean you won’t need help at some point, especially at the beginning. It helps to have someone who can show proof the model works and is doing well with it when you are speaking with agents about the model. When you’re new, you don’t have all the proof yet, so you’ll lean more on your sponsor. I’m similar to you in the fact that once I get going I don’t require much help but it was certainly nice having a sponsor at the beginning that could help with presenting and sharing proof.
      Does a CEO or owner ALWAYS outperform everyone who works under them in a traditional company? Do they not still earn from the performance of employees/contractors working in their organization?
      I hope these responses don’t seem confrontational. Certainly not my intent. You seem like a go-getter and someone who I’d love to work with (if you’re not already working with someone else). Head over to my partner page for more info.

    2. If I am newly licensed and have to find a Sponsoring broker to get paid isn’t that true for whatever company I land on?

    3. Dont think u understand model. You dont earn infinite revenue, only -3.5% before an agent caps. So the most you can earn after recruiting an agent is only a couple grand a year.

    4. The share provided to your sponsor does not come out of your commission, it is paid from the company coffers. The amount is equal to 3% of your commission but is not deducted from your commission.

  2. My wife is from Ukraine and just put forth a huge effort to get her license. She’s getting a bunch of letters from EXP agents. I would never allow her to fall into this trap. She wants to sell houses, not recruit real estate agents so she can make money from their sales. How can someone recruit real estate agents if they have not even sold a house yet themselves? Not interested. It’s just like those long distance telephone program scams years ago. They all went out of business and so will EXP in the end, but who ever it is that started this wont care, they got rich from all the “sign up” fees and membership fees. They walk away rich and it shuts down. They dont care. There’s no office or place to go to have a discussion with the boss or supervisor. You sit at home and can do nothing. Scam.

    1. Hey Keith, I appreciate your feedback and the comment. Let me ask you though. Who told your wife that she HAS to recruit agents at eXp Realty? On the contrary, 90% of agents at eXp ONLY sell real estate, have not recruited a single agent, and are very happy at eXp. Agent attraction is meanly an additional benefit on top of the slew of other reasons why an agent would want to join the company. Stock, training, live support, to name a few. It’s no different than an agent not using a tool that eXp provides. Not sure I agree with your comparison to whatever phone company you’re talking about.

      1. Kyle, can you please share your source where only 10% recruit? From everything I hear much, much more than that recruit. I would really love to see the sources you found this from. Genuinely interested.

        1. Stacy, I receive a report that’s not made available publicly that shows how many agents have attracted agents here at eXp. We currently have 45,000 agents at eXp and less than 5% have personally sponsored more than 5 agents. Don’t get me wrong, I’m sure many more eXp agents are willing and may even take some action towards recruiting. However, as far as actual dedicated “full-time recruiters”, who do not sell and only recruit, that number is much closer to around 500 agents total (and may be even less) in the company at this time.

          1. I was sitting in an open house and a managing broker from a different brokerage waltzed in and actively tried to recruit me, giving me a million reasons why I am in the wrong place, including bad mouthing my team leader/mentor. When that didn’t work she had a managing broker from a different office call me with a follow up. To say eXp are the only ones actively recruiting is completely false.

  3. Hi,
    Thank you for your post. I agree with you. Its just a business model option. I don’t see it any differently than and ANY franchise hiring (sponsoring) sales/service agents to help rep and/or expand their brand. It’s a choice to grow a team or not, but either way you get great support and perks from the brand you have chosen to align with.

  4. Hey Kyle,

    So happy to be partners with you!
    Thank you so much for a good work and support!
    Look forward growing with you together!

  5. Great post! I found out about this company from a real estate agent at my local chamber of commerce. She was with Keller Williams for 15+ years and then joined eXpRealty. She raved about this company, I do a little bit of investing on my own and when she mentioned the company to me, EXPI was trading at $5…I did not buy the stock then. A year or so later I was ready to buy my first house and used her as my realtor and she was with EXPI. After closing, I became more fascinated with the company and did my research, loved the busines model of agents being owners of the company. I did deeper research on MorningStar and looked at the financials. I loved the revenue growth, little to no debt, good ROE and ROA. I WAS SOLD! I bought $30k of the stock at $$11,82 apiece and since then the stock has gained 1000% in those two years. I've added more to my position at $75 and at $108 a share. I see this company going to the moon. I’ve made over $350k in profit alone on paper.

    I'm not a realtor, I work in the medical field but investing (not trading) is what I do with a lot of my free time. I'm tempted to become a Real Estate agent just go work for eXp to learn more about the ins and outs of the business. Because I want to put even more money into it as an investor but I’m a little skeptical about how it’ll growth profit for shareholders given the revenue sharing model.
    Because when shares are given to realtors, isn't this diluting current shareholders? I'm a little bit confused about how stocks are given to agents. If the company continue to grow exponentially with agents, doesn’t that just continue to issue more shares? I think the cap should be lowered and NOT in Perpetuity for the revenue sharing…we need solid profit to eventually pay dividends to shareholders way down the line.haha.

    Great post because I’ve wondered about them being an MLM and how that will impact future profit and share price.

  6. I question the amount of training a person gets when the decide to be a exp realtor. I had a recent situation where a friend put in an offer on a home along with 4 other offers. My friends offer was accepted by the sellers and told the realtor they really wanted to accept her offer. When the exp realtor sat down with the sellers she told them they had to take her buyers offer so she could get all the commission! So I question what kind of training a person gets when it is all done online without obviously any supervision. I have been a realtor for several years and find this way of doing business extremely unfortunate and confusing for sellers.

    1. Christine, the scenario you painted is confusing. Are there two agents? Or is this a dual transaction? How does your buyer friend know what conversation occurred between the seller and their agent?

      Putting those inconsistent details aside… Let's just talk about the key problem: An agent saying to their client that they need to make a transaction happen so that they can get their commission.

      Now it sounds unbelievably DUMB that an agent would say such a selfish, unethical thing out loud. But it's possible, because there are selfish people who are also dumb. More common perhaps is the agent who pushes hard for a sale that they know may not be in the client's best interest, without overtly saying "I just want my commission."

      Unfortunately, agents who do that, have existed forever in pretty much every single brokerage known to the world – from Coldwell Banker, C21, to KW and beyond, and long before EXP existed. The required education and salesperson license exams themselves should, in a better world, be screening out the unethical.

      But the truth is, that kind of behavior has nothing to do with training, and everything to do with character.

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