Salaried Real Estate Agents? Yeah, I like it...

By
Education & Training with Sell with Soul

The other day I wrote a blog about how I wish the whole world operated under the Tempur-Pedic model of Satisfaction Guaranteed or Your Money Back! Which, in a way, is how our industry operates as well since in most cases we don't get paid until/unless we perform. However, I promised to also explore the other side of the equation - that is - a real estate industry without commissions, without the emphasis on Pay for Performance.  In other words - a salaried or fee-based model.

The most common objection to the salaried real estate agent (and for simplicity, let's just call all non-contingency-based models "salaried") is that without the incentive to perform, service to the client would suffer.

In theory, that makes perfect sense; as I've experienced way too many times in the last year, once you've paid for something, you're stuck with the service you get or don't get, whether you're satisfied or not satisfied.

But here's the thing. That blanket assumption actually CONTRADICTS a big part of the traditional real estate compensation model - specifically - that we are paid a PERCENTAGE of the deal. That is - we make far more money on a $500,000 deal than on a $100,000 one. Therefore, the anti-salary line of reasoning says that we will naturally work far harder on the bigger deal than on the smaller deal.

I don't know about you, but I don't work that way. My $100,000 clients get pretty much the same attention and service as my $500,000 ones.  Not necessarily because it's the nice thing to do, but because that's WHO I AM. If someone hires me to do a job for them and I agree to be hired by them, my pride ain't gonna allow me to give them a half-a$$ed effort, regardless of the final paycheck. That's how I'm wired. Aren't you?

So, if we agree that we don't treat our lower dollar-versus-higher dollar clients much differently, is it really that big of a leap to assume that we are capable of providing excellent service under a salaried model?

If you were hired and paid a decent salary to take great care of a handful of buyers and sellers, would you really do a sub-standard job because you aren't being paid on contingency? Or would you take your job seriously and do your best because that's who you are?

Now, I'm not talking about prospecting. I'm talking about doing what needs to be done to market, contract and close your seller's home or getting your buyer into his first home, next home or dream home.

But see, this is where it gets fuzzy. BECAUSE of how we're compensated, our business tends to attract practitioners who view the career as primarily sales, not service. They enjoy the chase, the hunt, the pursuit - that is - they like to prospect. And there's nothing wrong with that. But those aren't necessarily the skills and talents that make a great real estate agent - one who gets her deals to the closing table - leaving a stream of satisfied buyers and sellers in her wake.

Which is, in my humble opinion, something we need more of in our industry.

But that soapbox aside, I can easily see a model where real estate agents are paid a salary to do the job their buyers and sellers hire them to do. The companies that have the best tools, training and systems in place to serve their customers will naturally get a larger share of the local business, assuming they have a decent marketing department. Sure, there would be a sales force, but most real estate license-holders would focus on taking care of their current customers, rather than on the pursuit of new ones.

This little blog isn't meant to be any sort of manifesto crying out for change, or anything like that. Personally, I like being paid on contingency because it means if I do a good job for my customer, I get a juicy paycheck, due to the risk I agree to take by working on contingency.  And I like juicy paychecks. But if I were to open my own real estate company, I'd seriously consider a salaried model, simply because that's the sort of practitioner I want to attract - one who would rather serve than hunt.

Just a few too many rambling thoughts on a chilly Monday morning...

 

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Rainmaker
508,975
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

Not a bad idea. But i think everyone here has covered all the points. I prefer the model that's in place right now. It's like an adventure. You never know what you will make from day to day.

Jan 04, 2010 10:29 AM #29
Rainmaker
786,727
Mike Jaquish
Realty Arts - Cary, NC
919-880-2769 Cary, NC, Real Estate

Jennifer,

Yes, I think we are on the same page.  We think we become successful as we help our clients to succeed!

Jan 04, 2010 12:20 PM #30
Rainmaker
2,394,939
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

You brought up a lot of valid points Jennifer!  It would be like buying a house at wal mart or any other store in which you can get ignored and still expected to pay full price...

Jan 04, 2010 12:50 PM #31
Rainer
67,772
Jan Evett
The Premier Property Group LLC - Rosemary Beach, FL
Broker Associate, 20 years+ in real estate

Jennifer, even during the freezing winter, you've found a lively hornet's nest!  Interesting ideas. I agree with CJ's view from the broker's side that it would be a difficult model for most firms.  I think the future of our industry will be led by agents who give exceptional customer service resulting in successful transactions.

Jan 04, 2010 01:03 PM #32
Rainmaker
180,011
Heather Fitzgerald
REALTY WORLD-Harbert Company, Inc. - Greenwood, IN
REALTOR Greenwood Indiana Real Estate

Jennifer,  Interesting concept.  I can see both sides, Katerina's and your thoughts as well.  It would have to be the absolute right fit, with some type of a contract on a trial basis to see if it would work on both ends.

Jan 05, 2010 07:05 AM #33
Rainmaker
484,157
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Heather - thanks for your comment! And I didn't really expect too many to agree 100% with me... sigh. But seriously - the system we have now ain't exactly working flawlessly, so why  not explore alternatives??!!

Jan 05, 2010 07:15 AM #34
Rainmaker
713,133
Cheryl Johnson
Highland Park, CA

Two thoughts have fluttered through my mind over the course of this virtual conversation:

1.  Maybe we could create right here on Active Rain a kind of "Fantasy Brokerage Game" (taking the hint from NFL fantasy league) ... We could create an imaginary brokerage with imaginary agents, and imaginary scenarios, and a talk it thru a series of "what if" simulations....

2.  I bought, read, and enjoyed Sell with Soul... I wonder if there is a niche for "Manage with Soul"... I don't think I am alone in saying that I did not start out with the plan to manage other agents....  life just sort of evolved that way ... and dare I say it?  There is so much I don't know about what I am doing...

Jan 06, 2010 01:39 AM #35
Rainmaker
484,157
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Cheryl - I love your idea of a Fantasy Brokerage! And Managing with Soul - I can't say I have much experience on that topic, except to say that you can and should trust your gut. Don't do things because that's "how they're done" or that's "how you were taught" - especially if these approaches don't seem to be working. Feel free to bounce ideas off me - I'm always willing to share my opinions!!!

Jan 06, 2010 09:08 PM #36
Ambassador
2,738,698
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

You quoted:  "The most common objection to the salaried real estate agent (and for simplicity, let's just call all non-contingency-based models "salaried") is that without the incentive to perform, service to the client would suffer."

IMO, which is, of course, meaningless to most, salaried real estate agents would require huge capital investment, more government involvement (withholding, etc.), mountains of paperwork, and worse.

Leave my income model alone and let me benefit financially by personal achievement.  Contingent fees are where the big money is.  We take the risk, we gain financially when a sale closes. 

That's real estate brokerage and that works for me.

 

Jan 06, 2010 09:26 PM #37
Rainmaker
484,157
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Lenn - I wouldn't dream of messing with your business model ;-]

But I do question why we think our industry is so special - that the model that works for lots and lots of other industries would be impossible or impractical for ours. Selling real estate is really no different from hundreds of other service-related industries - most of which also have the need to generate business for themselves - but they just have a small sales force who focuses on that, while the rest of the crew takes care of that business. Which, really are two different skill sets.

Jan 06, 2010 10:25 PM #38
Rainmaker
3,797,390
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Hi Jennifer,

Our industry is special because we are not manufacturing something and use a skill set to make and another to sell. We have a complicated service that involves often handling and caring for the acquiring or disposition of one of many customer's largest asset in their portfolio. National and state regulations ebb and flow with regulations as the economy changes which affects how our business is done. Continuing education is a must..this is not a business to enter for the faint of heart. Those who want to work hard and treat real estate as their own business are offered a chance to make a difference in peoples lives and their own pocket book.They can work as hard as they want and develop a strong, honest reputation with a following that enables them to earn as much as they want or be satisfied with less income..it is all up to how hard they want to make a success of owning their own business. It's a choice that one has in entering real estate..no one capping their potential.

We had a broker try that model here several years ago it lasted 4 months. This is not a 9-5 job. He had a good firm with great agents but instead of perfecting something good superior he spent most of his time searching for pie in the sky. He's still up there looking!

Jan 06, 2010 11:07 PM #39
Rainer
109,059
Linda Tremblay
Long & Foster Real Estate, Inc, PA License #AB065488 - Doylestown, PA
Associate Broker - Bucks County, PA Real Estate Services

Salaried?  Like punching a timeclock?  No thanks for me.

Jan 06, 2010 11:39 PM #40
Rainer
129,071
Deena Cottingham
GreenApple Staging & Images, Calgary Staging & Photography - Calgary, AB
Home Stager & Photographer

Great discussion, Jennifer! You bring up some good points about the pros and cons of commissions vs salaries. Ultimately, you're selling yourself either way . . . and I believe that's most successful salespeople's motivation for the great service they provide.

Jan 07, 2010 02:47 AM #41
Ambassador
2,738,698
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I've had assistants that took care of this and that and, sooner or later, they mess up.  I've learned to control every aspect of my buyer/client's transaction and transaction needs to ensure quality representation from the time a customer becomes a client to the time they walk out of settlement with the keys to their home. 

Jan 07, 2010 07:29 AM #42
Rainmaker
484,157
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Lenn - unless I'm misunderstanding your comment, I think you sorta just agreed with me???!

Dorie - thanks for your comments! But don't other industries have similar requirements and challenges? My job previous to real estate was a salaried position with a health insurance company and my job description was almost identical to what I do as a real estate agent - with the exception of generating business. Hmmmm, there might be a follow-up blog in there...

Jan 07, 2010 10:45 PM #43
Rainmaker
430,656
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Jennifer- I'm new to the business and I am committed to your sales ideas. These ideas would, I believe work very well in an employee based operation. I have felt since I first started in real estate that the basic business model is flawed. I came to real estate after years of owning a Mack Truck dealership. We paid our sales people small salaries (15-25K per year) plus commission. (in a good year most made nice 6 figure incomes) We also provide some expenses and full benefits. They were not required to punch a clock, but we had performance goals they were expected to meet. If they did not meet the goals, they were gone. We provided training and lots of supervision until they were able to work alone. I liked it because we had more control over what was said and done in our name. This type of system requires that a company have a very stringent hiring policy. I think that the real estate industry misses a lot of talented young people, because very few of them can afford to start a job where they have to front all the cost it takes to get started in the business.

Jan 08, 2010 01:38 PM #44
Rainmaker
484,157
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Tom - I agree. In fact, I'm writing a blog with a similar (sorta) approach - that there are other models that would work and the model we have certainly isn't a picture-perfect model of success!

Jan 08, 2010 10:35 PM #45
Rainer
334,480
Tom Davis
Harrington ERA,DE Homes For Sale, $$ Save $$ Buy Today ! - Dover, DE
FREE Delaware Homes Search!, $$ Save $$ - Find Homes! Delaware Realtor

Hi Jennifer,

I think real estate is one of the few things left in America that makes me proud to be working in America....if it were salaried...it would be a J.  O.   B.    and yes that's the equivalent in America for "JUST OVER BROKE"....and I don't want to be any part of that.... I already know what the unemployement numbers are and all the salary cutbacks, etc.... who wants that... no one.   I say NO to Salaried Real Estate! 

Love it the way it is!

I'm happy to be a Professional Realtor!

Thanks,

Tom Davis

Jan 15, 2010 11:49 AM #46
Rainmaker
716,233
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

I have to agree with Tom in that being employed (unless you are in the financial sector) means being just a little over broke.  A lot of people who have been working for themselves a long time don't realize how badly people on salary are doing these days.  Under such a model, there would have to be far, far fewer agents and each agent would hve to be VERY productive in order for the "house" to turn a profit - or just stay out of the red.  There isn't enough business for the agents out there now. I think most agents in my area earned less than $10k last year. I have a feeling the salaries would be very, very low..say around $40k.  If you want to know how bad salaried life is just look at the $38k I was offered for a 60 hour a week full-time professorship that included working through the summer, getting grants for research projects I would do, having a full course load (about 200 students) and having to shuttle between two campuses.  That's what salaried life has been reduced to in the US.

Jan 16, 2010 02:41 PM #47
Rainmaker
363,501
Mike Russell
Mike Russell & Associates - Overland Park, KS
Overland Park Kansas Real Estate

I heard that Weichert was testing this in Chicago. Don't know how iit worked. Think about how much Wall Street capital Redfin has burned through before finally becoming profitable.

Jan 21, 2010 01:09 PM #48
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