Can I have some more coffee?OK, here I go again, jumping into the Lion's Den. In today's post I want to take another shot at answering the question "As a listing broker, how do you justify your high commission?" My goal is to answer this question in a way that will satisfy, "the Sultan's of Short Sales, the Crusaders of Capitalism, and the Prophet's of Profit...Barry Cunningham and Barry Johnson" over at Real Estate Radio USA . I know, your probably thinking, "Broker Bryant, why are you wasting you're time with these guys?" Well.....it could be because I'm stubborn or.....maybe I'm just an idiot!! 

But, the real reason, is that I feel it's an important question and it deserves an answer. I had written a post on this topic back in November of ‘06 titled, "So what do you do to justify your high commission?" and in March of this year I went on Real Estate Radio USA to attempt to answer the question again. I wrote about it here, "Real Estate Radio USA and Broker Bryant Solve World Peace! Or Not!!"  I, also wrote, "Compensation or performance. Which one will it be?"  back in December of 2006.

Yesterday, Jennifer Allan of "Sell with Soul" fame went on the show to try and answer the same question. You can listen to her interview here. Jennifer had the same problem I did, trying to explain to the Barries how we justify our commission, without placing a dollar amount on every little thing that we do. 

In this day, of disintermediation and transparency, I truly believe that it is the intangibles that will make or break us. There is no doubt that Sellers can find everything they need, to sell their property on their own, online. Heck, they can even get their property placed in the MLS for just a few hundred bucks. And the reality is MOST properties, by far, sell through the MLS. I think the figure is about 85%. 

They do not need me to "market" their property and that's a fact. So why pay me x% to market their property? They shouldn't. If all they needed me for was marketing their property then I agree completely they are wasting their money. Hire a marketing company like "For Sale by Owner" and have at it. Just..... 

  • Be prepared to pay them upfront. 
  • Be prepared to arrive at your own pricing.
  • Be prepared to arrange all of you own showings. 
  • Be prepared to screen potential Buyers. 
  • Be prepared to negotiate your own deal. 
  • Be prepared to complete all contracts and disclosures required by law. 
  • Be prepared to deal with inspection issues. 
  • Be prepared to deal with unscrupulous REALTORS®, lenders and Buyers. 
  • Be prepared to deal with your own emotional issues with no one to turn to for advice and comfort. 
  • Be prepared to dispute a bad appraisal. 
  • Be prepared to find another Buyer when yours decides to walk at the last minute because you lost your temper with them over a $100 washing machine. 

All of these things sound very simple. However, anyone who has been in the business long enough knows that it's the small things that can blow a deal out of the water. Especially when emotions are involved. 

Of course, all of this assumes that you priced the property right from the beginning and that it was market ready. If not...then none of this other stuff even matters. A property is sold at time of listing. 

BUT....there are Sellers that are prepared to handle these things and if they are able....then they should. They do not need a REALTOR®. And they may very well be successful. I truly hope they are and wish them well. These folks are not my "market" and justifying my commission to them, is a waste of my time. And without a doubt....this group includes the Barries.

Now, if you are not in this group....give me a call and let's get together. We can then sit down, look at your situation and arrive at the best plan for you and your individual situation. I will then justify my commission to you. Fair enough?

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99 Comments on As a listing broker....how do you justify your high commission?

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Blog Boy...

I gotta park. I'm on much needed Blogging Break. Too much Blogging makes TLW fat :) 

Besides if I were to sit at the p.c. all day who'd do all the work around here...I know...Not you :)

TLW...ROAR!

07/01/2008 04:10 PM by "The Lovely Wife"...Broker Bryant's Wife... (Co-Owner Tutas Towne Realty, Inc.)

I think I'll just park behind TLW on this.  I'm guessing my email will be flooded:-)

07/01/2008 04:14 PM by Jason Sardi, Pennsylvania Mortgage Broker (First Choice Equity Group Inc.)

Listing are the way to go. Keep on blogging.

Bill

07/01/2008 04:15 PM by Bill C. Merrell, Ph.D. (Merrell Institute ~ Appraisal Education Network)

Jennifer hit on a key point yesterday that those guys missed...most of her work is done BEFORE she takes the listing.  They didn't grasp the concept of preparation.

They are real estate professionals, they buy and sell and research real estate all day.  Of course they don't need a real estate professional to sell their home for them.  That'd be like an auto mechanic taking their car to Jiffy Lube to get the oil changed.

But not everybody is a real estate professional and not everybody can do all the prep work to get a home sold.  Marketing is one small piece of our job.  I liked Jennifer's point that marketing should be aimed at real estate agents, not buyers, as agents are the ones with the  buyers. 

The only issue that I have trouble justifying is the % commission.  How come I only get paid $5500 on a $190k listing, but $21,500 on a $850k listing?  Do I really do that much more work?  Is it that much harder to sell a high end home than a starter home.

That's a tough one for me.

07/01/2008 04:27 PM by Matt Thomson Gig Harbor, WA Real Estate & Relocation (Assoc. Broker--Keller Williams Realty)

Bryant... you know damn good and well that our value is not in the number of color flyers we distribute, the billable minutes we spend on the phone with the seller or even an individual homes pro-rated share of my internet expenses... we are well paid because of the market expertise we possess. 

That experience and market knowledge is worth its weight in gold considering we can correctly position a clients home in the marketplace so that it sells in a timely fashion as compared to letting it languash on the market because some internet FSBO value calculator or God forbid, an "educated" guess by the homeowner pegged the price incorrectly.

There are some folks that want and have the ability to go FSBO.  Knock yourself out I say.  For the rest that need a professional to help them navigate a real estate transaction, then we're here for them.  End of story.

07/01/2008 04:31 PM by Fairbanks Real Estate Broker Jesse Clifton (Jesse & Kathy Clifton, REALTORS - 907.699.6024 - )

I don't accept the premise of the question. 

A successful listing broker doesn't have to justify their commission.  Fact is, if you want them, you have to pay their fee. 

Further, I don't accept the premise that sellers can successfully sell their homes themselves.  FSBOs have always been fringe, are finnge now and will always be fringe and the publicity about successful FSBOs is all anecdotal. 

I'll have to post something about the FSBO I visited Sunday. 

Broker Lenn

07/01/2008 04:33 PM by Lenn Harley, Homefinders.com, MD & VA Real Estate

As for Matt's question regarding the percentage question. It's called risk based pricing.  The higher the risk and expenditures, the higher my fee.

07/01/2008 04:36 PM by Fairbanks Real Estate Broker Jesse Clifton (Jesse & Kathy Clifton, REALTORS - 907.699.6024 - )

BB,

Not everyone is capable or has the time to use those types of companies. The ones that are should then. That tells me they are an expert at it and don't need me to negotiate or coordinate for them. My only question is if that's the case then why don't they go and get their license...it's cheap. And to join the MLS only costs about $700 a yr and if they never use it again they don't have to renew. That's not a lot of overhead considering that they also collect the commission on at least one end. They can join a company that doesn't charge much to hang their license either.

07/01/2008 04:37 PM by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)

No, actually I'm not thinking "Broker Bryant"... I'm thinking someone who needs to shove the "Broker" tag out in front of his audience is showing much insecurity with your position in the food chain.

After you calling yourself "Broker Bryant"... I can't even get past that to the rest of the post.

Cameron

07/01/2008 04:38 PM by Cameron Novak (The Homefinding Center)

^ Seriously?  Damn... What's that sound?  Is that TLW reloading? :)

07/01/2008 04:45 PM by Fairbanks Real Estate Broker Jesse Clifton (Jesse & Kathy Clifton, REALTORS - 907.699.6024 - )

Bryant, some folks like doing all that work as you described it. To others it is just a plain headache. The Realtor's job is to find the buyer and take the deal smoothly to close.

Lenn is right about FSBOs being fringe too. Only, what, 13% are successful at it.

07/01/2008 04:49 PM by Gary Woltal - REALTOR® Dallas Ft. Worth (Keller Williams Realty)

I listened to the radio interview and I have to wonder... who are these guys?  Clearly they see no value in hiring a listing agent, yet they are perfectly happy to have their FSBO's sold by an agent (who will more than likely do more than his/her fair share of the work for 1/2 of the commission.)  Just my 2 cents...

07/01/2008 05:11 PM by Melissa Schnieders (RE/MAX Premier)

Bryant - I've listened to your's and I've listened to Jennifer's interview. You both explained it really well how you justify your commission. You are both experienced Real Estate Agents. The reason the Barry's still question the justification is because they ask the wrong agents. They would have to ask an inexperienced agent that just passed the R.E. exam, who has been business for a short time to justify the commission. Maybe then, they will get the answer they are looking for. This question of justification will never go away, due to the stereotyping of Realtor.

Interestingly enough, Jennifer brought up a very good point about Real Estate agents that just passed a test, to be an apprentice. What is your take on this?

07/01/2008 05:51 PM by Petra Norris, Broker - Lakeland Realtor® Lakeland Florida Real Estate, (CDV TransAtlantic, Inc.)

Cameron, "Insecure" sums me up to a tee. Thanks for noticing!!! It's called branding by the way. And it's very effective.

Melissa, The Barries are certainly outspoken. Sometimes they are right and sometimes it's just for entertainment purposes. Hey....there's nothing wrong with that.

Gary, There are folks that can do it themselves and many that just think they can do it themselves. But there are far more that want a REALTOR(R) to assist them. That's my market.

Neal, I actually had a buyer that did that a few years ago. He spent several months getting his Florida license so he could hang it with a broker and get a commission on his own purchase.

Jesse, I wouldn't know any thing about those high commissions. My highest sake in 14 years is $475,000. Most are in the $100s. My sellers get a real deal.

Lenn, I do agree. Commission is a non issue. At least for me in my market.

Matt, We have been marketing to REALTORS(R) for years. It works. I want to make my peers want to show and sell my listings. One of our tag lines, for years, has been "Come on down to Tutas Towne...your REALTOR(R) friendly REALTORS(R)!!!"

Jason and TLW, Are ya'll fighting over a parking spot?

Bill, Thanks for stopping by.

07/01/2008 05:56 PM by Bryant Tutas-Tutas Towne Realty, Inc

Petra, I think an apprenticeship would be an EXCELLENT way to go. As we all know getting licensed does nothing to make you a good REALTOR(R). It takes training and experience. Starting out as an apprentice would help to get both of these. 

07/01/2008 05:59 PM by Bryant Tutas-Tutas Towne Realty, Inc

Bryant,

May I add, "Be prepared to net less than you would with a top real estate broker"...!!! Thanks,   Fran

07/01/2008 06:01 PM by Fran 'The Title Man' Gaspari Title Insurance-PA & NJ (Patriot Land Transfer, Inc.)

Broker Bryant, I haven't listened to Jennifers show yesterday, there are a couple I need to listen to.

I agree with Lenn, we DON'T, end of story.

I agree with what someone said Jennifer said, most of my work is done in preparation and the first week afterwards.

Then the negotiating once an offer comes in .

07/01/2008 06:22 PM by Missy Caulk Ann Arbor Realtor Ann Arbor Real Estate (Keller Williams Ann Arbor)

Well Gee...

I think the next time I have a referral for the Riverside California area I am going to send...

It over to Charmin...Opps...I mean Carmen...Oops...I mean Cameraon :)

P.S. Yah. I'm in a mood...Step awaaaaaaaaaaaay from the keyboard :)

TLW...ROAR!

07/01/2008 06:42 PM by "The Lovely Wife"...Broker Bryant's Wife... (Co-Owner Tutas Towne Realty, Inc.)

Bryant, it's always sort of amazed me that some agents are almost apologetic about being well-paid!  Other professionals who are good at what they do don't seem to be bothered at all by being paid the big bucks!  Why don't these radio guys start a show where they call in senior partners at big law firms and ask them how they can possibly justify the gazillion dollar an hour fees they charge.

07/01/2008 07:22 PM by Patricia Kennedy (Evers & Company)

Great post!  Love the list and it's so true that not everyone is our market and the sooner we realize this and move on the better.

07/01/2008 07:49 PM by Krista Fuchs Pennsylvania, Chester County Realtor (Prudential Fox & Roach)

I knew it, I knew it, I knew it. I just couldn't put my finger on it before.  Bryant is insecure!!!  Bryant?!  Who's Bryant?!  I only know of a Broker Bryant.  Never heard of this other Bryant guy though: no wonder he's insecure:-).....Maybe if he did something to make himself stand out so he was instantly recognized by thousands of people he wouldn't feel so insecure......Nah, what's the point in standing out, blending in is so much more effective, especially in this market;-)

As for the post: I expect a reasonable return on my investment and if someone doesn't see the value I bring to the equation, then I'm not going to take on their the risk.

07/01/2008 08:00 PM by Matt Moxhay Moorestown Real Estate (Prudential Fox & Roach)

The fact that you are willing to explain an expense to your sellers that most agents ignore out of fear of losing the listing (and so skirt it without effectiveness) is why you do fine with your fees, BB. Plus, you're that good lookin'.

Grandma Laurie YIPEE!

07/01/2008 08:11 PM by Options Realty

Thanks for the blog. I have a flyer I give people: 30 Things to Do To Sell Your Home (or things your Realtor will do for you) Some people will never get it.  Have a great 4th.

07/01/2008 08:31 PM by Veronica DeCarolis (Weidel Realtors)

If it were really so easy as simply posting a property in the MLS, how come so many homes are languishing on the market AND the mls.   The fact is this:  PEOPLE sell homes, and the mls is simply a database.  How the property is listed in the mls by the listing agent, what the remarks say (who do they target), which directions to the property (past the neighborhood jail or the park), etc... it's the difference between having a dental surgeon pull your tooth or tying a string around the tooth, attaching the other end to a door knob, and slamming the door.  OUCH!

07/01/2008 08:48 PM by Margaret Woda, Maryland REALTOR (RE/MAX VISION)

I like your approach. I did my own little historical data pull and also found that 30% of my team's sales were a result of direct Realtor to Realtor networking. Hard to do without one.

07/01/2008 08:59 PM by Kimble Bosworth (Village Real Estate Services)

Think lawyer.  Why pay 30%+ to a lawyer to handle a lawsuit for you?  I mean you can get a SERIOUS legal team for the money you are going to give up on the back end... and have enough left over for a new house. 

I offer discounted programs, but most sellers just don't want to risk their own money.

07/01/2008 09:05 PM by Lane Bailey - REALTOR & Car Guy (Diamond Dwellings Realty)

BB - enjoyed this post and it's a topic we discuss regularly here - I'll have to hear Jennifer's show - sounds like a tough audience. All I know is you ROCK - and are soooo right, Poinciana is getting a steal at any price :)  

TLW - Gotta admit Blogging has made my b*tt expand this past year - :( - it should come with a warning :)

07/01/2008 09:08 PM by Clearwater Real Estate Clearwater Beach Condos & Homes for Sale- Cyndee Haydon (Belloise Realty)

Broker Bryant, Well written. I think that's why most doctors don't operate on their children and immediate family, attachment.

07/01/2008 09:17 PM by Camarillo CA Real Estate Agent/ Mana Tulberg (Beach View Real Estate)

I found this post too late.  I wanted to flag it, but was beaten to the punch.  You did a great job of laying it out.

07/01/2008 09:24 PM by Randy L. Prothero - Hawaii REALTOR® (Century 21 Liberty Homes)

Bryant, I'm a fairly new broker, but I can't help but feel there's a flaw somewhere. I mean your blog alone, why would someone have to justify their fee? why would someone have to take the further step and blog about justifying their fee? I'm not sure where the flaw is, but I can't help but think it's an inside job. I mean something like taking 2 steps forward one step back scenerio.

sellers agents in particular. they spend more money than anyone else. advertising, office, etc.

buyers agents on the other hand may spend more time, but could get away with lower overhead.

07/01/2008 09:35 PM by Peter Z. Nikic

Not to mention, by big one...Risk and Reward.....we take a risk when we list a property.....if it does not sell, we are out all our time, engegy and effort...not to mention marketing dollars...       My favorite quote, was from the Erin Brokovich movie, when the lawyer revealed how high his fees were...the people gasp....then Erin said "Tell them how much you get if you lose" and he said "I get Nothing"   

07/01/2008 09:35 PM by Konnie MAC Northern Virginia Real Estate (Konnie McKee )

Broker Bryant, thank you for explaining so articulately that Listing Agents deserve every penny of their money and then some.  The individual tasks and responsibilities that REALTORS perform to sell their listings are increasing in this Buyer's Market.  Our commitment to sellers extends far beyond the resources allocated for advertising and "branding."  Before taking a listing, it is imperative to research the  competition thoroughly in light of the local market.  If a Seller is unrealistic about the asking price, it can be a real setback, all of which mean more days on market and increasing frustration for all parties.  Listing agents have had to wear many hats- especially recently: counselor, soothsayer, market expert, transaction management specialist, advertising guru, ethics specialist, home stager, chief negotiator, sounding board, risk manager data management specialist, and more!  

As you and some of the others intimate, the inherent knowledge, skill level, resources, expertise, and professionalism are all valuable assets to clients. 

For me, listing a property is a far greater challenge than representing a buyer because the window of opportunity to make an excellent first impression is narrow; the overhead is high.  It is an awesome responsibility to know that the seller's future depends on whether or not the sale comes to fruition.

07/01/2008 09:54 PM by Roseann Annis (Prudential Homesale Services Group)

I find the sellers that agree with you business model will understand the process and not complain too loudly about your fee.

07/01/2008 10:02 PM by Terry Westbrook ~ Realtor(R) Grand Rapids Mi Ada/Cascade Real Estate (Five Star Real Estate, LLC Grand Rapids , MI)

You Sir..... Are a TOP PRODUCER..... You don't need to justify your commissions.

*Note: My comment is best read if you imagine it coming out of Bryant's mouth while chomping on a cigar*

 

07/01/2008 10:12 PM by Tom Burris | Texas Home Loan Expert (DallasLoanGuy.com)

I loved your article!  Most folks don't show up to work and have to justify their paycheck to every customer they come in contact with, right?  So why should a Realtor be any different?  It's crazy to think that there is nothing more to it than putting it in MLS and a sign in the yard.  A good agent earns the trust of their clients by providing the items mentioned, plus dozens of other services along the way, and most Sellers who have gone through the process would never do it without an agent!  Great post.

07/01/2008 10:30 PM by Kathy Brown Sells Northern Colorado (RE/MAX Alliance)

I loved Lenns answer, that says it all....I have the experience, I get the job done and that's what justifies the commission.

07/01/2008 10:32 PM by Terry Lynch (GMAC The Kee Group)

I guess I'll have to respond the same as I did the last time you asked this. I DON'T try to justify my commission. I haven't had anyone ask in a long time. But off the top of my head, I guess I'd have to think of the amount of hours involved up front, with preparing a CMA, before I even meet the sellers. While I'm at the house, I spend at least 1 hour, taking pictures and video. Then it takes 2 hours just to process all the paperwork so that each site that pulls information from our MLS will have the right information. Then I spend a couple of hours making every photo look perfect! Then I create a postlet, a blog post, and put the listing on my own web site. Then I check to make sure the listing has gone viral to all the sites that are supposed to promote it. Then I create the video. That can take anywhere from 1 to 5 hours, depending on the size of the house. Oh, and let's not forget about the lockbox, and making sure the property will be easy to show. (Sellers who work cannot be available at all times.)

All that is just the beginning of the process. Sites and blogs have to be checked and updated every week so the listing doesn't get stale. Then we have to prequalify every buyer call. We also have to make sure we know exactly what every line in a contract means, AND be able to explain it all to the sellers. And we have to offer good advice regarding any loopholes or potential problems with each offer. Then when we finally get an acceptable offer, we have to keep a list of every date and watch the timeline for each inspection.

Now, we have to bear in mind how many listings don't sell. We do the same amount of work for every listing. And now gas prices have skyrocketed. If we work with buyers, we may have to shuttle them around for weeks, and look at 50 houses before they make a decision. That's another cost. And a good agent will attend every inspection. There's more gas money and time consumed.

Now, after all that, we have to make enough money to support our famillies, pay for continuing education, pay to be members of sometimes multiple REALTOR Associations, and if we've done a good job for our clients, we darn well deserve to get ahead in life!

07/01/2008 10:57 PM by Lisa Hill (Daytona Beach Real Estate) (Adams Cameron and Company)

Great post Broker Bryant. Keep them coming, I learn a lot from them! The topic of commission tends to come up a lot especially during times like this.....

07/01/2008 11:07 PM by Teresa Harris (Holbrooks Real Estate, Inc.)

Thanks for raising the issue. I didn't read everyone's comments, so i might have missed the point I am making here. Justifying the commission is not just about the sale for which we are getting paid; it is for all the work for which we did not get paid because of all the deals, buyers, listings, etc. that went south on us. It is for all of that education, experience, contract classes, marketing classes, masterminding, coaching, previewing and countless other things that contribute to the intangible value of a real estate agent. Keep the Faith. There are those that really do need our services and value them!

07/01/2008 11:11 PM by Michael Sahlman, P.A., e-PRO, Miami Beach (Keller Williams Realty)

I can easily justify my commission by logging into QuickBooks online and showing anyone gross income (sales) vs. what I take to the bottom and actually deposit into my personal checking account (profit -- although I do pay myself a meager salary that doesn't justify all that I do).  There are salaries to pay, benefits to pay for (at the very minimum, I believe everyone should have health insurance and the majority of the cost should be absorbed by the employer), technology costs (a biggie), subscription to various REO resources, professional dues and fees, expenses that are supposed to be reimbursed that are not, gas and the list goes on and on. 

I probably would have a hard time justifying things if I actually made what my limited liability company is paid, but being able to do that will have to remain a dream.

One thing that I have always respected Keller Williams is their open books policy.

07/01/2008 11:15 PM by Jesse Barron, REALTOR® - Real Estate Made Easy™ in Anne Arundel County, MD (Keats & Co. Real Estate, LLC)

BB This is Barry C using Brett's account. Let me first say that I have come to know you somewhat and feel we have earned a mutual respect. We have agreed and of course disagreed. Our discourse has always been professional and I enjoy mixing it up with you. I feel Cameron's comment above was uncalled for.

Now that we have gotten the Miss Congeniality portion of the program over..let's begin.

It's an old argument and one not to be won or even waged here. Something about preaching to the choir.

I'll reserve comment for the consumer. They are the ones whose opinions actually matter. I will continue to do my best to usher in the realm of transparency and provide the consumer with as much knowledge as possible. I believe the informed consumer can make their own choices.

Many have contacted us for information over the last few months and we have done many shows, delivered nearly 30,000 e-books, countless articles and given as many interviews and talks to consumer groups as necessary.

And as we grow we will continue to inform the consumer. We are telling them what questions to ask, how to find out an agents "batting average"..where to look for the information, what questions to ask an agent...and much, much more.

I have no need to convince or debate agents any longer. I'll let the consumer do that. Many will never ask, but you know what..many are indeed asking. And they are finding that many agents do not have the answers.

For the record, my belief is that listing agents have no merit and that listing a home can be done by the mirror fogging neanderthal. Anyone can list a home. I feel personally that it is outrageous to be paid 3% of the sales price to do what listing agents do. Never going to convince me otherwise.

However, I think those agents who actually procure buyers are worth their weight in gold and earn every penny of their commission. I have no problem whatsoever with an agent who brings the buyer to the table. I would be the first to defend that agent's commission.

On the other hand, it may take some time, but the curtain is lifting on the guy playing oz and pretending to be doing something when in reality he or she is not. Transparency will certainly take care of that.

The listing agent who basically preys upon the ignorance of the consumer will find their days numbered and I for one am going to advance that ideology as far as the wheels on this thing will take me.

BB..you're all right with me and I look forward to continued discourse with you. You're a class act who can stand toe-to-toe without going personal...which is more than I can say for some.

07/01/2008 11:32 PM by Brett Wilson -|South Florida Real Estate |Real Estate Radio USA| Real Estate News (Real Estate Radio USA)

People can do it themselves, but they should be prepared to net less money. They don't know what they don't know. They should prepare themselves to be taken advantage of.

07/01/2008 11:37 PM by Tigard Oregon Real Estate >> Wayne B. Pruner, GRI (Oregon First)

BB - You forgot to mention DOM. I am in a market where the average DOM is 145 days and that is for listings marketed in MLS. A FSBO could take twice as long to get the same results that an agent will by listing it in MLS. FSBOs need to know that they could be at it for months! Factor in the time it could rake with decling values...it's a no brainer! In this kind of market, why not pay an agent who can stop the bleeding faster?   

07/02/2008 12:12 AM by Carol Culkin (Century 21 - Anita Ferri Realty)

"How do you justify your high commission?" sounds like "when did you stop beating your wife".

That statement presumes that the commission is high in the first place. 

And what's "high"?

07/02/2008 12:22 AM by Madeline Island Realty - Eric Kodner Sells Madeline Island

You make some very valid points.  Regarding marketing, I suppose a seller could do it if they had the knowledge and had put all of the programs and systems in place.

07/02/2008 12:34 AM by Christine Donovan Costa Mesa Real Estate (Broker/Attorney) (Donovan Blatt Team - Donovan Group Realty)

Very well said, I think you made it very clear in this post.  I will listen to the interview with Jennifer.

07/02/2008 12:34 AM by Colorado Springs Realty Patricia Beck (Prudential Professional Realtors, GRI)

BB, you pay for what you get.  I think there is a reason why a few listing agents have all of the High End properties that typically have a "SOLD" signs on them.... AJ

07/02/2008 12:40 AM by Alan 'AJ' Nisen California Contra Costa Mortgage Officer (A Large Bank in America)

I represent both buyers and sellers. I deserve to get paid... just like anyone else. 

 

07/02/2008 01:13 AM by Celeste "SALLY" Cheeseman (RA), e-PRO HAWAII Real Estate & HAWAII Relocation (Century 21 Liberty Homes -Mililani, Hawaii)

Great discussion and always an issue. If not verbally at least in the mind of the seller, unless they have been through it all before and seen a transaction go haywire.

07/02/2008 01:22 AM by Brian Solinsky, ABR (Keller Williams Realty)

Does anyone know how to get hold of the audio of Jennifer's interrigation interview?  I was on the road with a customer and wasn't about to have them listen in the car!

The FSBO "listing"on our MLS had always been an issue with me.  It was hard to quantify because few of these brokerages had any "legs."  Being an academic, I felt I needed more raw numbers to make anything close to an accurate comparison. But I sort of put that to rest when one FSBO brokerage had enough significant listings to run numbers.  In my blog, I compared the FSBO flat-fee brokerage to another brokerage that covered the same territories.  In that way an apples to apples comparison was possible.  A  comparison revealed the following:

1. DOM was close to 60 days longer for flat fee....or about 2 mortgage payments, 2 months of taxes, heat and general upkeep.

2. 20% of the flat fee listings were in contract/sold for the flat fee brokerage - 55% for the full service brokerage

3. Average sale price was 7% less for the flat fee service and I was being generous because I lumped all the listings together.  The full-service brokerage had a large percentage cooperatives whereas all save one of the flat fee listings were SF homes.  Since a standard coop was being offered to the selling side, the flat-fee people didn't come off all that well.


There are some very savvy sellers for whom flat fee and FSBO works, but these are few and far between.  For most of the population a normal listing probably puts the most money in the seller's pocket.

A caveat - our market is VERY slow right now.  I do not know how these numbers would work in a bull market.

 

 

07/02/2008 01:39 AM by Ruthmarie Hicks (Keller Williams Realty)

Broker Bryant- All points well made.  Too often we see sellers who are so concerned about the wrong things and plant their signs on the front yard- unaware of the Real Estate laws and how they put themselves at risk for litigation, robbery, or other peril.   In this market, competing for the small pool of qualified buyers takes finese.

07/02/2008 05:47 AM by Allison Stewart REALTOR ®St. Cloud Florida (Florida Pines Realty, Inc)

Bryant, I just emailed your article to a REA friend that is having a hard time with a client.  Thank you for the post.

07/02/2008 05:55 AM by Terri Lucas (Exclusive Home Staging Staging Redondo Beach & Los Angeles)

I have been in this industry since 1981. The business has changed with the growth of the internet. My company is a full service discount brokerage firm . We price the home, advertise, schedule the showings, supply feedback, handle the paperwork and attend all the closing. We list homes for only $499 upfront and $1,500 at closing. If another company is the selling compnay they receive 3-3.5% for the sale. I do EVERYTHING a full commission company does for my seller including color card stock fliers which cost me .22 a piece.  I started this by Selling custom builders specs a few years ago when the real estate commission was more than the builder profit. I think the 3-3.5% is very resonable for bringing a buyer but the 3-3.5% for the listing is why consumer groups and the Justice Dept is up in arms.

 

 

07/02/2008 06:15 AM by Ebe Cotton

I know this is a simple reply. But the way I see it, if I have to be educated and get a license to sell real estate, then even the state validates the importance of what I do. I mean, car salesmen don't have to be licensed- right?

Not only do we have to be educated to obtain the license, we have to continue educating ourselves on a yearly basis. Thus, making it even more apparent that what we do is of high importance. 

And in response to Matt's comment about getting more on a high sale than a low one because it's a percentage: I have no problems justifying that one. If I am listing a $150k property, my marketing is for $150k property. On a Million dollar home, the entire marketing package is FAR more expensive in every way. Yes...much larger risk and worth the % on the sale.

 

 

07/02/2008 06:22 AM by Kimberly Wilson (Power Realty Partners)

Kimberly..you're kidding right?

BB..this one would be WAY too easy!

07/02/2008 06:25 AM by Brett Wilson -|South Florida Real Estate |Real Estate Radio USA| Real Estate News (Real Estate Radio USA)

Good morning! Woke up to a great discussion. Matt - I can't answer that question either - and I've asked it several times. But we can discuss it elsewhere, off BB's blog.

Judging by BC's comment above, I guess I wasn't any more persuasive than you were... sigh...

Great points mentioned in the blog - and as we discussed yesterday, if a seller wanted to/was willing to pay me upfront for my services, with no guarantee of performance... I'll take THAT deal all day long!!! A big part of our fee is that we work with no guarantee of compensation. Sellers pay us to CARE a whole lot about their home sale.

07/02/2008 06:36 AM by Jennifer Allan, Author of Sell with Soul (Sell with Soul)

  WE don't get a lot of argument about commission...an occasional whine about the price which these days is not what sellers wish for...and we don't either of course.  I tell folks, it's the only job that I would ever have and actually LOVE paying to go to work...I am more than betting on that I can sell their house...I am putting MY money, MY time and MY effort where there house is....and with an over 99% list to sale average...I know I can do it better than most folks...NEXT !

07/02/2008 06:40 AM by Sally & David Hanson, Southeastern Wisconsin Realtors (First Weber Group)

The biggest benefit that agents provide is just keeping a deal together.

There are so many times when silly little things and misunderstandings can potentially blow things apart.  Sellers get angry at low ball offers or the word termite sends buyers scurrying.

So many things that most of us take for granted are unknown by the general public. 

Consumers are getting more educated about the process but by the questions that I get asked, I have to say that most consumers don't have a clue when it comes to real estate.  It's not rocket science but it seems to be more complicated than the average person can handle.  Maybe 10% can figure it out themselves.  I'm looking for the other 90% who need some kind of help.

07/02/2008 07:01 AM by Tim Maitski (HomeAtlanta.com)

Interesting reading, I simply tell my clients that I'm worth the difference between what the other realtors may take and what I charge. Then I show them my marketing plan and explain "
once again" the work I have already put into creating their CMA. Of course my CMAs are normally significantly more thorough than my competition's.

 

 

07/02/2008 07:26 AM by jcalvin.activerain.com

WOW!!! Great comments everyone. I appreciate you stopping by. I wrote this post with a little "tongue in cheek". My purpose was to get a conversation started and to see how you guys would answer the question. Here are a few more thoughts.

In my business I rarely if ever get questioned about why I charge what I charge. So justifying my commission is just not something I do.

If you are attempting  to justify your commission, to the consumer, by explaining what your costs and splits are I truly feel you are missing the boat. The consumer could care less how much you have to pay your broker, or gas, supplies etc..They want to know "what's in it for me". So you could outline advertising costs related to their specific property if you were so inclined. Personally, I don't and wouldn't. My costs to do business is my business not theirs. 

I am however, very happy to show them where and when their property will be advertised, be it online, print, post card or whatever. This relates to them and they have the right to know. It's a fair question. Although I don't believe this has anything to do with my value.

Barry, I truly think you feel that way about listing brokers because you have so much experience and are able to do things yourself. The average seller is just not capable or willing to sell their own property. They want help.  I don't think you will ever see the value unless you yourself worked as a licensee working for sellers. It's a perspective you don't have. I finally started getting my business back on track this year and have placed 8 properties under contract in the last 30 days. 3 are with my buyers and 5 are with sellers. Out of the 5 seller deals, 3 of the buyers found the property online through my marketing (video tours) and then contacted their REALTOR(R). In 2 of these cases I'm dealing directly with the mortgage broker because the buyer's agent is nothing but a "door opener" for the mortgage company. These deals would not have happened if it weren't for me, the listing broker.

OK...I have to go to work but will be back later.

 

07/02/2008 07:54 AM by Bryant Tutas-Tutas Towne Realty, Inc

As you point out your list is deceptively simple. I think it may even work against you.  One huge thing it doesn't demonstrate is how much TIME and effort the home selling process takes.

How much time do you spend on an average listing? All the phone calls, open houses, showings, waiting for faxes, waiting for lawyers, playing therapist to keep the seller happy, more phone calls, the back and forth to get an offer/counter offer accepted, and everything else that keeps the deal together and moving along, it all adds up!

I wouldn't be surprised if after adding up all the time spent on an average listing and calculating their hourly rate if most agents wouldn't demand a higher commission or leave the business.

07/02/2008 08:10 AM by Alan Myers (Boston Image Maker)

BB..I just listened to your Radio Show..Good job buddy

07/02/2008 08:28 AM by Mike Norvell Sr., Developers Capital Realty (Developers Capital Realty, LLC)

Thanks for posting this topic, BB! It is very inspirational.

I'd like to get paid MORE for listing properties because I just don't enjoy it as much as working with buyers. But I guess my days of preying on the ignorance of consumers are over. :)

Cheers,

Robin

07/02/2008 08:58 AM by Silverbridge Realty

BB,

Let me pass this on to some people who might not be aware of this...talking about justifying your commissions should be ok but discussing commissions is not a good idea as you might remember Calebs post about the subject. Discussion the actual fees is a no no and there is always the liability that someone out there might see it so in my opinion...the fees should only be discussed amongst the Realtor(R) and the client. I won't post that link here without your permission.

07/02/2008 09:00 AM by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)

Bryant,

I like the way that you put this. It is true that most people really have no idea about what goes into this business... or even every succesfull transaction for that matter. You and I are in different yet related fields and it drives me crazy when people complain about about there being a fee for my service though I do not run into that very often because the clients whom I choose to work with know that I work hard for them. However, I do run across complaints here and there on the internet and I always think to myself "what if we worked by the hour"... If I charged even just $100.00 per hour like a low priced attorney I would make out much better than I currently do and I feel that the reason that there is resistance from some people to pay us what we deserve is because they do not have a proper understanding of the work that goes into each transaction behind the scenes.

 

07/02/2008 09:15 AM by Christopher Ohlsen (Lake City Mortgage)

BB,

You can discuss this, till the cows come home.  Like in any profession, it is what you know....then do it!

Dick Beals

07/02/2008 09:21 AM by Wilmington Real Estate 4U

"If I charged even just $100.00 per hour like a low priced attorney I would make out much better than I currently do"

What makes you think so. I only use my attorney when I need him. It's not like the meter would run continously. He also bills me in 15 minute incrementals.

So let's take a look shall we.

  1. Listing Appointment (initial consulatation): No charge
  2. Entering Property on MLS (15 minutes) - $25.00
  3. Calling and Ordering Yard Sign Placement - (15 minutes) $25.00
  4. CMA & Research On Property (1 hour) - $100.00
  5. Open House (Optional) (2 hours) - $200.00
  6. Buyer's Contract Review (15 minutes) - $25.00
  7. 20 Incoming Calls About MY Property (200 total minutes = 3.33 hours) $325.00
  8. Listing Syndication (30 minutes) $50.00
  9. Taking Pictures (30 minutes) $50.00

Total Billable Hours: @ 8 hours..Hmmm..$800.00 You're hired!

07/02/2008 09:29 AM by Brett Wilson -|South Florida Real Estate |Real Estate Radio USA| Real Estate News (Real Estate Radio USA)

I don't know anyone who charges for the initial consultation(listing appointment) so lets not include it. I do know some that charge a fee for a CMA or for BPO's.

Brett,

Your model is interesting but I'm not sold on it.

If it works for you then that's great but I can't see using it here.

Calling for signs? A fee? for what? I have my own signs and do not charge to stick it in the ground...never have never will....some neighborhoods don't even allow signs here.

Open houses here do not work and I can't fathom someone charging for one. Most agents in out area don't even want to do them...I'll do them if the owner insists but I don't charge a fee.

Negotiating a contract or reviewing can be done by the agent or an attorney. That liability is justified.

Incoming calls? Are the calls running on that meter? Never heard of such a thing.

I don't charge for pictures...our MLS can take them or the agent can take them but I never heard of anyone that charges for pictures.

My fee is my fee and everything I do is included....how about all the anguish you have to go through with the other agent involved not doing their job? What about the inspections and the appraisals? You left those out. I would think those services were more justified then some of the others you mentioned.

 

07/02/2008 09:46 AM by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates)

Coming in from the financial side (mortgages, equipment leasing, commerical lending) we always run into this issue.  Why are you charging 2 points?  Why do I have to pay recording fees?  Why should you make $4,000 on a $200K loan?  (Ten points on unsecured commercial and 15 points on a small equipment lease is not uncommon)

You get these questions from people that would never question a doctor's fee, a lawyer's retainer or billable hours, or even what a plumber would charge to unclog a drain.  (No disrespect to plumbers, doctors or lawyers)

We are the only industry where the consumer knows what the salesman is making.  Your milk would be cheaper if you could negotiate the cashiers wages at the supermarket. 

You charge what you charge because you do not work for free, no one does.  Your time has value to it, just like doctors, lawyers and plumbers.  People that deeply discount their fees at the first sign of customer balking have little respect for what they do.  I know how to be competitive when I need to be but when you add up the hours some files/deals take to get done you find yourself making less than minimum wage.

 

 

07/02/2008 10:05 AM by Michael Loeb (Top Group Capital Corp.)

"how about all the anguish you have to go through with the other agent involved not doing their job?" huh??? you expect to be compensated for that?

What about the inspections and the appraisals? You left