I've been a little absent from Active Rain for awhile now - no real good reason, just had to triage my time and blogging took a backburner. Happily, for me anyway, Loreena Yeo's featured blog yesterday "It Costs $$$ to Do Business inspired me to jump back in and spout some opinions!
In case you missed it, Loreena's blog was about how there are some deals NOT worth doing - and she referenced one in particular where both a referral fee was due and a buyer rebate requested. When Loreena did the math, she decided that the net paycheck simply wasn't enough to cover her cost of doing business, and therefore respectfully declined to represent the buyer.
As her blogs always are, it was well-written, insightful and thought-provoking. Neato Frito.
However, I must respectfully disagree with the blanket conclusion that an agent's full commission MINUS referral fee MINUS buyer rebate EQUALS not-enough-payday. Perhaps it does, perhaps it doesn't; it really depends on the situation and the dollars involved. There certainly IS a cost of doing business, but that cost doesn't change significantly depending on the price of the home being bought or sold. If a $500,000 transaction MINUS referral fee MINUS buyer rebate does not lead to an acceptable payday, does that mean the agent should turn down business in the $150,000 - $200,000 range which would lead to the exact same payday?
I'm not saying that we should (or should not) offer buyer rebates - I have no strong opinion on the matter. Nor am I saying that we should (or should not) work with lower-end buyers or sellers. Those are personal business decisions every agent (and his or her broker) can make for themselves.
What I am saying (as I've said many times before) is that our traditional compensation model where we are paid based on the price of the home we help our clients buy or sell is seriously flawed. And unless someone can give me a compelling argument (aside from "that's the way it's done") as to WHY it makes sense to pay us twice as much on a $500,000 transaction than we're paid on a $250,000 one, or, conversely, half as much on a $250,000 sale than on a $500,000 one... then I'll probably continue to dance on this soapbox (in fact, I have two more blogs fired up and ready to go!).
The thing is - there ARE alternatives to this model; alternatives that make sense both for us, the real estate practitioner and more importantly, the real estate consumer.
More to follow (it feels good to be back in the Rain!)