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How Real Estate Agents CAN Give Themselves a 25% Raise

Real Estate Agent with NEPTUNE REALTY 0225-075558

Did you know you can give yourself a 25% (or more in some cases) raise just by hanging up the phone?  It’s true, just cut out the dead weight referral industry.  Years ago, real estate agents began the practice of giving referrals to other agents in exchange for a not so modest percentage of the fees generated by that referral getting to a closing table.  This is a friendly practice that helps build business relationships all over the country.

Then about 3 decades ago, the tech world looked around and saw that agents were getting 7% of the sale price when a home is sold so they set their sites on taking a slice of THAT pie.  Percentage based referral fees are considered compensation, and laws prohibit “outsiders” from participating in that party, so they formed (or acquired) real estate brokerages enabling them to legally dip their beak into real estate commissions.  Agents, who were already accustomed to the hefty referral fees, took the bait dumping thousands of dollars into referral companies for nothing more than providing contact information of a “hot lead”.  Companies who sell leads that are not percentage based are not regulated by state real estate boards.  Both types of lead generation companies then set out to advertise heavily, tricking buyers and sellers into contacting them rather than their trusted local agent, and the race began.

The business models of these companies often includes charging “setup fees” for the privilege of being affiliated with their system, and they sell “subscriptions” to agents who were not disciplined enough to generate their own leads.  Have you ever encountered an agent-to-agent referral who wanted a setup fee to talk with you about either of you giving the other a lead? 

So, many agents went the direction of buying leads rather than generating them, that it created an entire industry which just rakes in the cash for doing very little actual work.  (The old-timers can tell you, agents actually generated their own leads before the internet existed, and many built impressive careers in the industry actually representing consumers in real estate transactions.)

I don’t want to sound too down on lead generation services.  The capitalist side of my brain, loves it – a way to make mounds of cash for VERY LITTLE WORK.  But many agents are unwittingly contributing to their own demise because the agent purchasing leads MUST close additional transactions each year, just to pay the fees lost to the lead generation industry.  However, the commonsense side of my brain recognizes this as a self-destructive practice.  If I am accepting a referral from a licensed agent who has a personal relationship with the buyer or seller they are sending my direction, I have no problem paying a referral fee, even the hefty ones that have become standard, because we are building relationships with other agents and since referrals are a two-way street, it balances out over time.  But when is the last time you heard of a referral company willing to pay you several hundred (or thousand) dollars if YOU SEND THEM a buyer or seller lead?  So it’s not an equitable system.

The lead generation industry is spending large sums of money, which you paid them, to purchase advertising in the form of pop-up ads that interrupt what you were trying to do, spam emails hawking their high-quality leads to you, and unsolicited phone calls to trick you into paying them.  But are consumers really getting a better transaction than if they had consulted a live agent who referred them to a live agent in their destination market?  In most instances, the answer is a resounding NO.  They are getting a random agent who purchased the lead with very little, if any, screening of the consumer or agent.

I have a solution.  The next time someone asks, “Could you use an additional 4-10 leads per month?” have them add you to their DO NOT CALL LIST and block their number.  They are NOT trying to help you; they just want to put their greedy little hands into your paycheck.  THEN call, text, mail a letter or postcard, or go visit a PERSON whom you’ve “been meaning to contact” and start generating your own leads.  Whenever you talk to friends, consumers, and past clients, be sure to remind them that YOU are the person they need to call, and YOU are the person to whom they should send their friends needing real estate assistance.  Educate the public on the reality that EVERY TIME you click on an ad from a lead service, you are taking money OUT of your local market (often times out of the country) and moving one step closer to real estate agent becoming a minimum wage job.  Develop the habit of cultivating your own leads and give yourself an automatic raise by NOT lining the pockets of the lead generation industry.

Posted by

Search the MLSDrick Ward, Realtor and Broker Associate    757-575-5156

Neptune Realty - Virginia Beach, Virginia


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Comments (2)

Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Dec 13, 2023 03:15 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Enjoyed your blog page, and I added you as a follower. I would love the follow back. Also, then we both get 50 points. Bill

Dec 13, 2023 09:57 AM