The future of commission-based real estate
This morning, the message was sent out via Twitter that Inman News in February will be examining the future of commission-based real estate.
And to that, all I can say is that it’s about time. If ever there is a (non) topic that routinely has been twisted to suit the purposes of whatever particular axe someone wants to grind, it’s the concept of real estate commissions. Knowing the higher standard to which Inman News holds itself, I have every confidence that this won’t be the same years-old rehash that agents make too much money, etc. Not only wouldn’t that be news, it would be a gross mischaracterization of the real estate industry.
Seven Basic Truths
Any objective analysis of real estate commissions undoubtedly will uncover these basic truths:
1) There is no set compensation structure in real estate. Some agents and brokerages work on a commission basis. Others charge only a flat fee (and in some cases, no fee) for entering listings in the MLS. Sellers are free to select the brokerage that most closely aligns with their own perception of value and have the right to negotiate with any agent on any fee. The worst that will happen, as is the case in any negotiation, is one side or the other says no and the seller moves on to the next brokerage down the line.
2) Compensation for buyers’ agents is negotiable. There are many agents and brokerages that negotiate the compensation they will receive at the very beginning of their relationship with a new buyer. So if a buyer has an issue with their agent accepting the compensation offered through the MLS, this can be addressed at the very beginning. And, again, if the two sides can’t come to an agreement there are many alternatives from which the buyer can choose.
3) Commission checks are not pure profit. Let’s say an agent receives a $3,000 check on a $100,000 sale. From that $3,000 the agent then needs to pay a split to their broker, national income tax, state income tax (depending on the state), local income tax (depending on the municipality), fixed costs such as gasoline and automobile payments and maintenance and other operating expenses (office staff, etc.) Whatever is left after all that is paid is what eventually goes toward groceries.
4) Fixed costs accrue regardless of whether a transaction results. Marketing of listings in many cases is paid out of pocket by the listing agent with no up-front fee charged to the seller. When working with buyers, the fixed costs accrue and time is spent whether the buyer purchases or not. Every agent has experienced a situation (if not many situations) where hours and hours have been invested with someone who doesn’t buy a home.
Which is okay, because we knew that side of the bargain when we started working with the person and presumably our own personal business model accounts for that … just as the prices you pay in a store account for expenses such as breakage, which are passed down to the consumers who do purchase.
5) There’s no barrier to entry for alternative models, save for the public’s willingness to embrace them. As has been proven by Redfin, any company can enter the real estate game with an alternative model. To coin a poker phrase, all you need is a chip (if not millions of chips in venture capital) and a chair and you’re in the game. As also has been proven by the various iterations of Redfin’s model for working with buyers, market forces will determine whether any particular model is successful.
This is the very nature of entrepeneurship. A new idea is developed and it fails or succeeds on its own merit, unless we’re talking about the WNBA. Those that fail almost universally complain that The Man held them back or there was some sort of competitive disadvantage (damn McDonald’s and those Golden Arches), but the reality is an idea with sufficient public support – financial support – will succeed.
For instance, as a solution for those buyers who look and look and look and never buy, I could offer a fee structure where I’m compensated either hourly or by the home. Accounts would be settled at the end of the day, my fixed costs would get covered and the buyer would appreciate that there’s a cost associated with the search for a home (not even getting into the actual negotiations.)
What prevents me from doing this? Certainly not an edict from the National Association of REALTORS, whose leadership is too busy planning their next parade float to pay attention to what one member decides to do. No, the reason I don’t adopt that model is I don’t believe there’s a market for it.
We can argue whether there should be but it’s almost as pointless as arguing that there doesn’t need to be an episode of the CSI franchise on television 24 hours a day on one station or another. The public demands CSI and so it’s there. The public isn’t demanding the ability to pay up front for their real estate agent’s time so that niche doesn’t exist.
6) Commissions are more negotiable than many other fees consumers pay. Talk to many real estate agents and you’ll discover that there are many variables in what many charge for their services. Fees are negotiable.
Take this same approach with a different industry … say subscription-based online real estate journalism. I invite you to take a moment and call the folks at Inman News to negotiate what you’re willing to pay to become a premium member. For some, the amount Inman charges has sufficient value to justify the cost. For others, there’s little to be found at Inman News that can’t be found in a hundred other places on the web absolutely free.
It’s absolutely irrelevant what fixed costs Inman News may have, after all. That’s Brad’s problem, not yours. Decide what value you receive from peeking behind the subscription firewall and make your offer based on that amount. Surely they won’t take the same route as the inflexible agents that have been mocked in prior years’ news stories and tell you “this is what we charge, take it or leave it.” That would be hypocritical.
7) What my buyers and/or sellers elect to pay their real estate agent isn’t anyone else’s business. One of the most beautiful things about real estate is the ancillary jobs that have been created that have next to nothing to do with real estate.
For instance, take Inman’s vice president of content and community manager positions (both of which are filled more than capably by friends of mine.) As a member of the general public who may or may not use the Inman product, do you believe that you should have a say in the salaries they receive?
Of course not. Which is why I find it curious that so many people believe that the general public, who may or may not use the services of a real estate professional – any real estate professional – should have a say in the compensation said professional receives from a buyer or seller. If a buyer and seller agrees to compensate an agent in a certain manner, if they’re comfortable in doing so, why is this anyone else’s concern?
Real estate agents aren’t receiving tax dollars … most of us aren’t even receiving the vast quantities of venture capital that have kept some of our competition afloat. So why is it our 1099s are the subject of debate when the W-2’s of others vaguely connected to this industry are not?
Go back to point number 5 (it’s in Chapter 3 of this admittedly lengthy post.) If you don’t believe in any particular compensation model, come up with something different and see if it floats. It’s that simple.
Is there an agenda here?
This has been a rather lengthy post but I believe it’s a mere pittance compared to the length of an objective month-long investigation of the many myths that surround real estate commissions. No doubt, all of the above points not only will be made but will be supported by a number of published articles, or at least enough to offset those that would perpetuate the myths to support their own business model.
Because the basic reality surrounding this entire topic is everyone has an agenda that they’re trying to push, even if it’s simply to push a business model that the free market hasn’t chosen to embrace…
… or if they’re attempting to co-opt a conversation rarely if ever heard outside the online world of real estate journalism and blogging in the name of increased subscription and convention sales. (Though you’d have to think, if at any point the real estate populace gets the feeling that the host of a conference is trying to make a buck by slamming the entity know as “real estate professionals,” maybe they’d finally stop shelling out the dough.)
7 Low-budget marketing ideas for small businesses [sponsored]
(MARKETING) Marketing ideas are often expensive or ultra time consuming, but let’s talk about some proven tactics that won’t break the bank.
The following marketing ideas are provided to you buy Threadsy:
No matter the size of your business, marketing matters! It’s important for small and big businesses alike to attract new customers, establish brand awareness, and to create buzz around products and services. But we know that not every business owner has tons of funds to devote to their marketing strategy. The good news? There are some highly effective marketing tactics that are also budget-friendly!
Here are seven low-budget marketing strategies for small business owners and side hustlers to grow their reach:
1. Sponsor Local Events
One of the best ways to get to know potential customers? Actually meet and talk to them! When you sponsor local events, you can be on-site to help people put a face with your business’s name. Sponsoring events is also a fantastic way to offer branded merchandise that can help you get your name and your logo out there.
Besides branded materials like signs, banners, or fliers, think about offering some fun items like wine bags to give away to attendees. Goody bags also make fantastic take-home options for local events. A branded canvas tote can be repurposed as an environmentally-friendly grocery bag, lunch bag for work, or a carry-all accessory for conventions and tradeshows. Print your logo on the outside and fill your goody bags with customized items like water bottles, notebooks, pens, and towels.
2. Let Your Colors Fly
Make some cool t-shirts featuring your logo! Wear them to the sponsored events mentioned above, out in the community, or anywhere you may encounter potential customers and can strike up a conversation. You can also offer t-shirts at a discount in-store or online, and turn your loyal customers into advertisers.
Quick tip: Purchase wholesale shirts to reduce manufacturing costs.
3. Social Media
If you’re not already leveraging social media to promote your business, it’s time to start! Think your customers aren’t using social networks? While certain demographics use various platforms more than others, according to fundera, 74% of consumers rely on social media to guide purchasing decisions. Plus, 96% of small businesses say they use social media in their marketing strategy.
So use your social media channels to level the playing field. To maximize your time and effort, determine where your audience members spend their time. Which platforms are they using? If you have a dedicated social media strategist on staff, they can perform audience research to tailor your approach to your existing and potential customers. If you’re running your own social strategy, spend some time digging into the demographics to determine which platforms make the most sense for your brand. From there, you’ll need to decide on the types of content you want to post, how to interact with your customers online, and create a social media calendar to plan your strategy.
4. Host a Giveaway
Once you’ve got your social media strategy up and running, why not host an online giveaway/sweepstakes to build some buzz, boost engagement, and attract followers? Pick a social media platform where you already engage with your customers. You’ll want to offer an item as the prize. This can be anything from a free product, a discount on an expensive product or service, or inexpensive swag like hats to help you promote your brand.
Once you’ve chosen the prize(s), decide on the terms for your giveaway. For example, an Instagram sweepstakes might look like this:
- Create posts about the giveaway and explain the rules (multiple stories and 1 or 2 posts depending on the length of the contest)
- These posts should specify the terms, for example:
– In order to enter, potential winners must follow you
– Encourage your followers to tag other people who may be interested. Each “tag” gets them another entry into the contest
– You can also specify that contest applicants must share your post on their own profile
- Once the contest has ended, pick a winner. Tag them in a post and story announcing what they’ve won and ask them to also share these posts to their own profile
Quick tip: You can also offer smaller or less-expensive items as consolation prizes. People love free swag and it’s an easy way to get your name out there!
5. Referral Discounts
Offering friends and family discounts on your products or services can help you establish loyalty and promote exclusivity. Offer discount codes or create a refer-a-friend program. You can also offer small incentives for customers who share about your brand on social media. Referral discounts are a great marketing strategy whether you use them in-store, online, or both.
6. Create or Update Your Blog
If you already have a website, you can put it to use to help build brand awareness and attract high-funnel customers. Blogging is a low-cost way to generate organic traffic (website visitors via Google or other search engines). If you don’t already have a blog, there are a number of free and inexpensive blog platforms you can use including Wix and WordPress.
You’ll want to write about topics that are related to your product or service and are of interest to your customers. For example, if you offer graphic design, you might want to create content about how to find an effective graphic designer online, or which projects you can do with an online platform like Canva vs. more complex projects where you should hire a professional designer.
Your website and blog are also great places to post “about us” content to offer website visitors an opportunity to learn more about you, your business, and your mission and values.
7. Update Your Google My Business Profile
Google My Business (GMB) is a free tool that allows you to share important information about your business like your address, hours of operation, and contact information. When your listing is optimized with this information, it’s displayed in Google Search and will also appear in Google Maps, which can help you attract local customers.
To get started, you need to create a GMB profile and verify your business information. This is a relatively simple but important step to ensure customers are able to find your business or service online. Make sure to keep your listing updated if you change any information like your website URL, address, or hours.
When creating your marketing strategy, remember to stay true to your brand. Not every tactic will be the most effective for every business. Choose the tactics that make sense for your brand or product offering. Another way to prioritize is to consider the perceived impact and effort of each marketing strategy. Use the strategies that require the lowest effort but will potentially drive the highest return.
Once you have those in place, decide which of the other strategies make sense for your customers and your business goals. Also, make sure to keep track of all of your marketing expenditures and the sales from these tactics so you can assess which ones were successful and which ones you may need to re-evaluate or alter.
Remember, when it comes to marketing, it’s an ever-evolving system. Trust the process and try to have some fun with your marketing strategy!
Yelp listings now show companies’ COVID-19 policies
(BUSINESS) Yelp has updated their settings to allow business owners to make their COVID-19 policies public, so consumers are aware in advance.
Yelp recently added tools to help businesses share their COVID-19 restrictions and policies with consumers, focusing for now on vaccinations. This is the latest in a series of attempts to combat misinformation and illegitimate reviews plaguing the platform.
Yelp has rolled out two new attributes for businesses to add to their profiles last week.
One option, a tag that reads “Proof of vaccination required,” communicates clearly the need to carry one’s vaccination card (or, presumably, wear a face covering) to gain entry. The other – ”Staff fully vaccinated” – speaks for itself.
These attributes stand to increase customer awareness of the circumstances facing them before visiting a business, thereby cutting down on frustrations – at least in theory.
The general public’s dearth in understanding regarding social distancing protocols and business restrictions certainly wasn’t helped by the fact that different states had different responses to COVID-19 – and that’s not even taking into account the microcosmic changes cities found themselves making.
For example, while the state of New York may not require proof of vaccinations to enter restaurants, New York City certainly does.
Rumors are that San Francisco may be implementing similar legislation, positing that other cities may very well go in the same direction.
To compound on this lack of uniform response, small businesses are finding themselves having to make their own policies as the cities around them ease up on restrictions. It isn’t out of the norm for a restaurant staffed by at-risk employees to ask customers to wear masks, so as Delta surges in places with low vaccination rates, it isn’t terribly surprising that those same establishments would ask to see proof of vaccination.
Yelp looks to make this process as transparent as possible with their profile attributes, but they’re aware that there was a general uptick in frustrated customers leaving poor reviews for restaurants that required masking or other social distancing actions.
“Yelp says the practice [of review bombing] has gotten worse in recent months,” reports TechCrunch.
In response, Yelp will be employing both automated and human moderation measures to ensure that businesses aren’t unfairly targeted for their protocols. This is actually something the company did after adding the “Black-owned” attribute (and subsequent identity attributes) last summer as well.
If you’re interested in adding either of the new attributes to your business profile, you can find them on the “Yelp for Business” page.
As the pandemic continues to develop, we may see additional COVID-19 attributes from Yelp.
Society has changed – no one wants help in a store anymore
(CUSTOMER SERVICE) Times are changing in the retail environment: a once customer-service driven experience is evolving into a minimalistic customer service approach.
Once upon a time, good retail management meant good customer service skills – asking customers if they needed assistance, helping them decide what looked best on them, and politely stalking customers to insure a sale was completed.
As technology evolves and become more prevalent and pervasive in our lives, these skills are no longer needed or wanted. A new study suggest that shoppers want to be left alone while browsing in stores, rather than be stalked, questioned, and coaxed into buying items they may not explicitly want due to persistent pressure from sales associates.
An HRC survey found that a whopping 95% of shoppers would prefer to be left completely alone while navigating the retail environment, rather than shopping under a constant barrage of questions: “Can I help you find anything?” “How are you today?” “What brought you in?” and the seemingly endless stream of inquiries, not to mention the sales pressure from those employees working on commission, can simply be too much for consumers looking to relax, browse in peace, or simply get in and out of a store quickly.
While the greater majority of shoppers may prefer to be left alone, this should not come as too much of a surprise, considering how much technology has supplemented the shopping experience. With enhanced apps and self-checkout lines it’s not hard to understand why most shoppers prefer to browse solo.
Smartphones have given us the ability to check prices, order goods, and check stock all without interacting with another human.
For many shoppers, this is an efficient way to save both time and money while shopping. For other shoppers, like myself, smartphones offer another way to shop without triggering my anxiety. Asking for help, or a price is nearly impossible – I’d rather go without an item than have to ask someone for help.
Sounds ridiculous? Believe me, it feels ridiculous too, but nevertheless, having alternative ways to shop without interacting, is a blessing for many people, for a variety of reasons.
What does this mean for stores? It’s time to take another look at your apps and/or mobile presence (and in-store wifi availability). Since customers are shying away from human interaction, is your app allowing people to scan for prices? Can your customers check stock and order things online to be picked up in store? Can customers use your app to enhance their shopping experience in-store? If not, you may lose customers to stores that offer these enhanced apps.
Times are changing.
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