VAR’s sometimes-wacky special counsel (you know, the one who utters the words Kama Sutra in a webcast about the ethics of short sales) is fond of talking about agent commissions and offers of compensation in terms of chickens. 200 chickens to the buyer agent and so forth. For the purposes of this post, I’m borrowing his phraseology. Thanks, Lem.
Seriously: What’s the deal with downward pressure on commissions? Especially in this market. Sure, I understand that market forces are at play, there are competing agents to beat out, limited service brokers offering a low flat fee, etc. Still, I think REALTORS® undervalue themselves. Over beers one recent evening, I talked with two top-drawer REALTORS® who I admire tremendously. They both flat out said the work they do for a client isn’t worth 300 chickens. Their argument was that the time they spent on the deal didn’t justify all that poultry. That may be true, if you assume that the amount of money you earn should be proportional to the amount of time you spend on a deal.
Drawing a Parallel
Is drawing a parallel between the amount of time you spend on the deal and the amount of money you earn the right way to think about your compensation? I’m not convinced. People pay more for extraordinary expertise and results. They also will pay for a quick and painless transaction. If cost were the determining factor in buying decisions, there would be no Ritz Carlton, Lexus, Jiffy Lube, or Nordstrom’s. We’d only have Red Roof Inn, Yugo, Hank’s horseless carriage repair shop, and K-Mart.
Why don’t we see more value-based fees in real estate? REALTORS®: Why not set your fee based on your expertise? Because we’ve always done it that way? I realize there are MLS rules to grapple with, but are they insurmountable?
A Natural Way to Price Services
With so many REALTORS® promoting their services as real estate consultants these days, a value-based fee seems like a natural way to price services. Think about it this way: Your value isn’t based on how much time you spend selling a property or showing homes. It’s based on your knowledge. In fact, if you can make the intellectual leap that your expertise is more valuable than your time, you should be able to justify 600 chickens for a sale that, for example, takes less time than the average. Paradoxically, the more you understand how valuable your time is, you’ll increasingly realize that your expertise is even more valuable.
Yeah, there are factors beyond your control that might inhibit the potential of your expertise to deliver extraordinary results. Is that holding you back from a value based fee structure? It doesn’t have to, in my view.
A friend of mine started his consulting firm on the guiding principle that he would never charge by the hour, only by the job. He understood that his expertise was more valuable than his time. He stands firm on this principle and does just fine. Dude makes a retarded amount of chickens. He has inspired me to do some freelance writing, public speaking and consulting work on the side while I’m not slaving over a hot CPU at VAR. My most profitable freelance gigs have been those that are based on the sharing of my knowledge, not how many words I wrote or how many minutes I spoke. So I go looking for consulting jobs, not speaking or writing gigs.
Freelance consulting is different, certainly. But is there anything to be borrowed? There must be. And… I’d love to hear examples of agents charging value based or other alternative fees based on something other than time or a straight commission.
“House has spark” – burning up the MLS with typos and other bloopers
The year is starting a march toward its natural ending, friends…and it seems a few real estate careers may be also. This week I found some real head-scratchers in local real estate ads and the MLS. However, I get submissions from all over the U.S., so no one is safe from the eyes of the Blooper Scooper. Check out these blunders:
Do You Smell Smoke?
“House has spark” (Apparently your real estate career isn’t the only thing going up in smoke.)
“Big pep area in kitchen” (Is that the cookie jar where Mommy Dearest stashes her uppers?)
“Dull Viking ovens” (Methinks there’s something in the cookie jar that will perk up those dull Vikings.)
“Large greenhose in back” (Large, naked Jolly Green Giant in yard.)
“Mush added to this house” (Was that the overflow from between your ears?)
I Think I See Flames
“Beautifully remolded guest” (Another cosmetically-altered Barbie hits the Hollywood party circuit.)
“Enjoy a drink poolslide” ( Hell, if the pool is sliding, I’ll need a whole pint of Jack.)
“Each bedroom has own bedrooom” (Hello-o-o, Alice, how are things down there in the rabbit hole?)
“Separate pod to build GH” (That should please my pea-sized buyers.)
“Play room for the kiss” (Something tells me this is the back seat of a ’67 Chevy.)
“Ideal for gusts” (That’s great…if you want to live in a wind sock.)
“Impaccably detailed” (Incredibly challenged)
“Stylish pewder room” (Try burning a match.)
“Stone pillars flake driveway” (Flakey agent got stoned in driveway.)
Nothing But Embers (This Week’s Fave):
“From a bygone error” (You have just written your own epitaph.)
What makes a top producer in real estate?
Stop and think for a few minutes about who the top producers are in your market?
Ok, now think about what they doing that has allowed them to continue to consistently produce in a down market, when everyday REALTORS are throwing in the towel.
Every day I scan the MLS to see, what has sold, what is active, and what went under contract (I assume that is something most agents do every day.)
Over and over again the same names pop up as the listing agent with the home that sold or the actual buying agent that sold the home.
Except for one agent in my area, all the top producers have teams. Now it may be a two person, husband and wife team or a well oiled team with a team leader, several assistants, a listing coordinator or a closing coordinator. But, they all have HELP.
In my area, the names that keep popping up are on Teams. I believe it is virtually impossible to be a top producer without help. Well, you could do it alone but if you do how is that effecting time with your family? Realistically how many transactions can you juggle and give good service?
Running a Business
The second thing I notice about those top producers is the fact that they treat their business like a business. Real Estate to them is not just selling a house, but something they brand, allocate resources for, grow and manage. Not only are they thinking of ways to grow their business but they also thinking of the future and how to sell it down the road.
I remember being told by a entrepreneur friend of mine years ago, “all businesses are built to be sold.”
Far to many REALTORS, think of Real Estate as a job they do and someday when they retire then all the hard work of creating and nurturing relationships they have built is gone. (I’m outta here)
Focused and Positive
One other observation I have observed with top producers is they are focused and positive. I never see them “hanging out at the office”, or attending broker opens, or really for that matter, serving much at all on their local boards. Oh there are a few, but really very few.
Finally, I don’t see many top producers in my market on Twitter, Facebook, Empire Avenue or other social media sites during the day. I don’t see them at every conference known to man around the country.
What I do see is they work everyday, on their business and in their business.
How ‘bout you?
Think of the top REALTORS in your market, what characteristics do you see?
“New bd pans inc” – Making a Splash on the MLS
I have two things to say this week: 1. When you drink, you can’t think. 2. When you drink you can’t- … uh, what was I saying? Oh, yes – the MLS. It was so full of bloopers this week that I am led to conclude that happy hour started Monday and never stopped. Read these and tell me if it is any wonder I was driven to throw back a few martinis myself:
Booze ‘N’ Fools
“Free membership to gin inc” (It seems someone else beat us to it, Martini Mary.)
“Grab now use imagination” (That’s what Arnold said to his housekeeper.)
“House has new edition” (Agent lacks erudition.)
“Babblying broke runs in back” (Bumbling buffoon runs amuck.)
“Drop by for cocktail ho” (Oh, is the Sunset Strip for sale?)
Puff ‘N’ Stuff
“Near Sacramento airpot” (I believe his name is Jerry Brown.)
“Claw me for selling” (I’m too busy clawing my eyes out over your spelling.)
“Reduction on mid-century ner Holywod” (Another mid-sixties porn star is looking for work.)
“We can sake your home” (Can I get fried rice with my sake?)
Proof or Goof
“Nice streem” (Said Grandma to Grandpa after his diaper exploded.)
“Nice for dog kids” (Uh, they’re called ‘puppies,” pal.)
“New bd pans included” (Thank you, Nurse Nancy – can you warm those first?)
“Good stable in neighborhood.” (Have you contacted Mary and Joseph?)
“Drawing for plasma” (Is this a blood-bank?)
And This Week’s Winner Is:
“Good school in areola” (Thanks for keeping me abreast of things.)
PROOF OR GOOF, FRIENDS – I’M WATCHING EWE 🙂
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