Stuck In The Box? Stay There!

By
Industry Observer with Retired in Samar

Although I wrote this article several years ago, it is still applicable today.

Our local business journal, which is a monthly supplement to the local paper, came out this week and the theme or focus was real estate. Among the many articles written, one article clearly stood out as a simple- minded contradiction to reality. The article was a piece about a brokerage firm in our area and dissussed both the history of the firm and their success in the marketplace. Honorable. But....

At a time in our history when our commissions are under attack, this broker's explanation of commission justfication was simply wrong. "People think that we don't earn our money, but we do. We may have an easy house to sell, but we have a lot more harder ones to make up for them"  She stated. When one publicly tells the consumer that the reason for the size of their commission is to cover all your "other work that didn't pay," well this costs our entire industry one giant step backward.  This is not the stock market and we don't perform dollar-cost-averaging with our listings sales!

In the eyes of the consumer we are sales people who happen to work on a contingent-on-sale commission basis. If you have ever had to explain to a consumer what exactly they're paying for when they pay by commission, you may have struggled with an answer that makes sense.

Here's the scoop: Commissions have little to do with compensating an agent for time and services. Commissions are all about mitigating risk. As an industry we should learn to call a commission what it is and, unless we do so, we will continue to see our compensation erode and our value undermined. When a person pays for real estate services by commission, they are in fact paying a premium for a specific outcome and the "insurance" that if they don't achieve the desired outcome, they pay nothing. In other words, this is Economics 101: High risk must be paired with high reward.

The article was summarized and she provided advice to people that may be new in the real estate industry: "Do not try to reinvent the wheel..."

In an industry that has undergone tremendous change in the last 5 years, economically and technologically, none of us should be still inside that box! That's the old way.

 

Thanks to Mollie Wasserman for commission analogies.

 

Posted by

 

  Randy Landis, Overseas Retirement Consultant.

 

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Comments (6)

Robin Dampier REALTOR®
Coldwell Banker King - Hendersonville, NC
Hendersonville & Western NC Real Estate Source

One proven fact of life is change and the real estate industry as well as many other business's are realizing they had better adjust and get outside that box.

Sue of Robin and Sue

Apr 02, 2011 03:33 AM
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

Heck, real estate has changed much in the last TWO YEARS.  Our job is to control change so that it does not control us.

Apr 02, 2011 01:46 PM
Randy Landis
Retired in Samar - Tupelo, MS
Overseas Retirement Consultant

Doug ~ Change is occurring to lending, transactional volume, and business models and specifically compensation models. We have no control over lending and the consumer but we do have control over the implementation of how WE conduct business.

 

Apr 06, 2011 02:52 AM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

What a great post, I agree with you.  I can't believe any REALTOR  would try to justify commissions in that way.  WOW!

Aug 01, 2014 08:55 PM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

BTW as to your comment about being outside the box, I am by nature a very creative person.  I once had someone give me a great compliment.  She said, "Sybil, you don't think outside the box.  You don't even know there is a box!"

Aug 01, 2014 08:58 PM
Randy Landis
Retired in Samar - Tupelo, MS
Overseas Retirement Consultant

Sue ~ I'm happy to say I got so far out of the box, I retired. Thanks for commenting.

Sybil ~ I think that "Responsible Broker" is no longer responsible and has been replaced...to no surprise.  What does a box look like BTW? lol

Aug 04, 2014 05:19 AM