The Salaried Real Estate Agent - Part II

By
Education & Training with Sell with Soul

Last week sometime I posted a blog questioning whether or not a salaried model of selling real estate could work. Personally, I think it could, and will even go so far as to say that the public might be better served under that model. And I'll probably expound on that opinion in the near future.

But not surprisingly, most respondents didn't much care for my idea of the salaried real estate agent. Various objections were raised, including the rather ego-centric one of "But I don't WANNA work on salary! I like being my own boss!"

And hey, I agree - I, too, enjoy the pay-for-performance compensation structure of the traditional real estate model and I love the challenge of never knowing if next month will be my biggest ever... or, um, not even close. And I most certainly have no desire to punch a time-clock.

But that wasn't really my question - whether or not "we" like the idea for ourselves. The question was whether or not it is a viable business model. And again, I'll likely pontificate more on that later.

For now, though, let me ask this question. Would you have gotten your real estate license and gone into the real estate business if:

  1. The average SALARY (that is, guaranteed pay) was $75,000 + benefits & bonuses, and
  2. You had no sales responsibility (that is, your job was to manage the transaction, not procure business)?

Just curious - your thoughts? (And no, I'm not thinking of opening up my own salaried shop - egads - SO not my thing to manage people!)

Part III Here...

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Rainmaker
1,157,329
FN LN
Toronto, ON

Jennifer - The salary model will appeal to some people but not others. 

Jan 16, 2010 01:45 AM #3
Rainmaker
785,520
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Hmmmmm.. Considering that the current model is to pay to produce, what you propose is so much different.  Where is the incentive to work the weekend, at night... or heck to return the phone call?

In the mortgage world there has been the salary model come and go. typically the best will make considerably more on commission, and the transactions will be easier for the client.

Jan 16, 2010 02:24 AM #4
Ambassador
1,377,728
Loreena and Michael Yeo
3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co. - Prosper, TX
Real Estate Agents

Salaried agent, hmmmm. I have to think long and hard about this one. On one hand, it means much easier than to try to work my tail off than now. $75K is alot of money. But then again, before I dream my own dream of the constant paycheck - WAIT, isn't this 100% compensation model the true test to our industry? Only the fittest , the best of the pack survive. Let the not so good let themselves go.

So, it's a very long way to say: I dont we never get this way: SALARIED.

The reason I quit my corporate job is to see how far my abilities can take me. If you tell me how much I'm worth, hmmmm.... no way. It wouldn't be challenging enough for me.

Jan 16, 2010 02:34 AM #5
Rainmaker
1,431,667
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I like being my own person.  Every job I have had that required me to set at a desk and log hours has been a failure for me.  I have worked on commission or been self employed for most of my life. 

I understand where you are coming from.  However, do you know any body that would pay for us to sell homes that will pay even if we fail or they list too high?  Not many I suspect.

Jan 16, 2010 05:47 AM #6
Rainmaker
1,043,188
Kevin J. May
Florida Supreme Realty - Hobe Sound, FL
Serving the Treasure & Paradise Coasts of Florida

JA, seems like great pay for an exceptional personal assistant. 

Jan 16, 2010 06:16 AM #7
Rainmaker
485,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul

Thanks for your comments - please keep them coming. I'll reserve my comments til later... but I appreciate all your thoughts!

Jan 16, 2010 06:21 AM #8
Rainmaker
413,305
Lisa Heindel
Crescent City Living LLC - New Orleans, LA
New Orleans Real Estate Broker

Considering the average agent doesn't make anywhere near $75k and has no paid benefits, I could see a lot of people, especially new agents, jumping on this.

Jan 16, 2010 06:52 AM #9
Rainmaker
1,143,871
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

RedFin agents work on salaries. Their model seems to be working OK. many builders have paid their agents by salary for years. I guess for me it would depend on how large the salary was and whether I'm the one paying or the one receiving..

Jan 16, 2010 09:11 AM #10
Rainmaker
186,701
Tanya Nouwens
RE/MAX ROYAL (JORDAN) INC. / Tanya Nouwens Inc. www.readysetsold.ca - Montreal West Island, QC
Montreal Real Estate Broker & Stager

As a new agent, I'd jump on this!  And then once I got really, really good, I'd want to set out on my own to really let myself fly. Does that make me ego-centric? Probably. But I left a job that paid more than 75K to start in this crazy business called real estate. I did it so that I could open up my potential and feed my passions for staging and selling real estate. But it's tough at the beginning, no? -- Tanya in Montreal

Jan 16, 2010 01:07 PM #11
Rainmaker
342,854
Elizabeth Bolton
RE/MAX Destiny Real Estate Cambridge, MA - Cambridge, MA
Cambridge MA Realtor

Hi Jennifer ~ It doesn't really call out to me.  One of the many things I love about real estate is that I can decide how much money I want to make. And a salary? That sounds like a boss would be involved.  Ugh!  I still skip in to work seven days a week and somehow I don't think a salaried position would generate the same enthusiasm.

Liz

Jan 16, 2010 01:53 PM #12
Rainmaker
717,806
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Well, $75k is not a lot of money around here.  You really need to be in the six figures in our area not to be living hand to mouth.  Now, as a new agent, I would have jumped on this.  New agents may use this to get started in my area, but as they learn that they can do better on their own, they will go the more traditional route.  Although this wasn't initially an issue, I have to say that I do like being my OWN boss too much to go the salary route.

Jan 16, 2010 02:25 PM #13
Rainer
212,763
Dennis Swartz
Full Circle Property Management - Columbus, OH
MBA, GRI...experience counts!

I would have taken that job! Thats better than many attorneys get starting out. Will the idea work? Yes, but you would need a huge change in thinking!

Jan 17, 2010 06:10 AM #14
Rainmaker
350,727
Sally Lawrence
Advantage Real Estate - Tehachapi, CA
Broker, CHS, e-Pro, SFR, REALTOR®

I don't think this is a model that I would encourage.  Considering that 6% of the agents do 94% of the business, I'd have a lot of trouble feeling comfortable with the 94% in that model.

Jan 17, 2010 11:43 AM #15
Rainmaker
713,645
Cheryl Johnson
Highland Park, CA

I'll speak up again from the broker's side of the table.

Let's say I have 4 agents at $75,000 per year.

Let's say the average sales price in the area is $300,000.  Assuming 3% per transaction, the 4 would need to close about 34 sides per year to just to cover everyone's salary.

Now let's say Suzie closes 24 escrows per year, and Mary only closes 6.  Is Suzie going to be happy about earning the same salary as Mary for more than double the production? 

Johnny and Jimmy close 2 each.  What do I do with Johnny and Jimmy, especially if Jimmy is a veteran who is really good at mentoring the others?

I know Redfin works on a salaried model, as BB pointed out.  And I think it could probably work for larger, corporate style brokerages.

For a small, independent office with just a few agents, I think it would be a financial nightmare; not to mention all the extra management stuff of taxes and employee regulations.

 

But to answer the question you actually asked:  It would depend.  I imagine there would be an employment contract, and certain terms would be dictated in that contract.  My decision would be based on what those terms are... Certain things I would be required to do; or not do?  Certain work hours? Certain production level?

 

Jan 18, 2010 12:13 AM #16
Rainer
176,189
Julia Odom
Select Realty Professionals - Chattanooga, TN
Chattanooga Homes for Sale

"But to answer the question you actually asked:  It would depend.  I imagine there would be an employment contract, and certain terms would be dictated in that contract.  My decision would be based on what those terms are... Certain things I would be required to do; or not do?  Certain work hours? Certain production level?"

 

That's pretty much my answer as well. In theory, your question is one I would probably say yes to.

Jan 18, 2010 06:43 AM #17
Rainmaker
717,806
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Ok - I guess I tend to be obsessed with numbers.  Statistics was a big part of my life for many years, so I keep trying to work out the numbers on this - and the logistics:

Ok - so let's run the numbers....I'm assuming a 2-2.5% commission so 2.25.  We have a wide range of pricing but the median sales price in our city is about $400k. To break even you would need over 8 transactions per agent.  But that doesn't include benefits, retirement, insurance.  Also, the leads are coming from the office so marketing is a big issue.   So now we are probably looking at more than $100k- $120k per year, per agent.  That's a little more tha 12 per agent.  Let's say you have 10 agents - that's over 120 deals.   Yikes, you better have very strong lead generating system in place.  That kind of volume is going to be very difficult to come by around here.  Other parts of the country appear to have more deals per agent as the norm, but around here that's a nearly impossible number to meet.

Jan 18, 2010 11:39 AM #18
Rainmaker
713,645
Cheryl Johnson
Highland Park, CA

Excellent points from Ruthmarie!

A few more thoughts:  As a beginning agent, I'd probably love it.  As least I'd love it until I got canned for not meeting production quotas.  :-)

As a broker, it's giving me a headache just thinking about it.

Jan 19, 2010 01:48 AM #19
Rainmaker
76,436
Bridget Cella
Re/Max Connection - Sewell, NJ
e-Pro, Realtor

As with anything, if it is done right I think it would be a good thing.  I think many sellers and buyers think we are already anyway and then just get the commisssions as a bonus.

I sat at a settelment and was chatting with my buyers - "Wait aminute, you don;t get paid unless we settle?" Uh, hello - no!  All of the money and time I spent with you was just becasue I enjoy your company! :)

Hmm- sounds like a good blog post!

Jan 19, 2010 02:09 AM #20
Rainmaker
485,057
Jennifer Allan-Hagedorn
Sell with Soul - Pensacola Beach, FL
Author of Sell with Soul
Rainer
78,409
Bill Wallace
Bridge Realty - Bloomington, MN
William Wallace

I think NAR says the average full-time Realtor made $35k last year.  If that's the case you'd have a lot of below average real estate agents trying to latch onto this.

That said, if you are breaking it down to a hunter/farmer type model (hunter gets the deals, farmer harvests them after they are in place) you always pay the hunter a lot more money since it's a lot harder job.  In fact, would the farmer/servicer even need to be a Realtor?  Couldn't a broker just pay an Admin to manage the deal after it's in place (like I'm sure many do already)?

Jan 27, 2010 12:52 PM #22
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