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Give consumers what they want, ask for more in real estate commissions

Technology has made this housing crash more bearable, not easier, so why haven’t real estate commissions increased tenfold? They haven’t, yet there is still this burning need to negotiate from a floor – do you think your home seller respects this? No way, they love easy prey, sucker.

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real estate commissions

An innocent question posed in a Facebook group this morning was about the 6% commission debate and why commissions are 6% if it’s a myth. It is a simple question with a simple answer that I can give because I am no longer a Realtor, and I’m absolutely entitled to my opinion whether you like it or not, as are you.

The 6% isn’t really a myth, albeit the average actual paid real estate commission is much lower at around 5%. It is a fact that the commission is negotiable, but what consumers and Realtors have never understood is that from a sales perspective, that 3% per side has become more of a fictitious floor than a ceiling. When you ask a Realtor why, quite honestly, no one really knows, but the default knee-jerk response is, “but commissions are negotiable.”

Sure they are, it’s an absolute fact, but again, from a sales perspective (a lesson for any sales related business, not just real estate) negotiating from the floor is a failed proposition as a business.

Sure, people like to say it’s so easy to list a property because they have an iPad now, and possibly a responsive MLS they can enter data into, but quite frankly (and I know listing agents will mostly agree, or at the least successful ones anyway) the expectations on listing a property have grown exponentially, as well as the expectations on the property agent themselves. The amount of hours it takes to actually hammer a square transaction through the round hole of closing has indeed increased tenfold – this is just a round number factoring shortsales, troublesome financing, or combating a neighborhood marred by failed mortgages and foreclosures.

Technology has made this housing crash more bearable, not easier, so why haven’t real estate commissions increased tenfold? They haven’t, yet there is still this burning need to negotiate from a floor – do you think your home seller respects this? No way, they love easy prey, sucker.

As milk prices have increased, gas prices have exploded, the cost of paper, ink, technology, supplying real estate porn to aggregators, the costs of featuring property within online environments and so many other factors of day to day life and business have risen due to the cost of doing business, yet real estate commissions have remained the same – around 5%?

These costs have to be passed on somewhere, and to be quite blunt, volume listing of property is costly and in high demand – just ask Trulia, Zillow, and Homes.com and others why these portals are not out acquiring their own property listings? Their answer will be that it’s not profitable. And why aren’t consumers uploading their own properties for sale in greater numbers? Because in the end, real estate search sites cannot support the consumer demand side in service of the listing, and that’s a fact. Instead, that’s laid on the backs of the listing agent and broker in their model – another cost of doing business.

So, in summation, I’m not going to tell you what you should be charging as a real estate commission per side, but I do think listing agents that are really in business have to look at the reality of the cost of doing business. Buyers agents say every day that it’s easier because of technology, but that’s not true of the listing side.

It wouldn’t surprise me if in this very year you don’t see listing brokers increase their commissions for their side of the transaction and lower the buyer side offering, and if they are the smart sales professionals I believe them to be, that fictitious floor and cieling could burst upwards to 8 or 9%, and why stop there? In some ways the cieling is regulated, but I’m not sure that’s really been challenged in court. If you’re truly negotiating commissions, shouldn’t you negotiate from a position of strength? It’s just good business.

So I say that each broker needs to do a real analysis of their business models and listen to their consumer – they want to negotiate, and it’s about time listing brokers gave them what they’ve asked for.

Benn Rosales is the Founder and CEO of The American Genius (AG), national news network for tech and entrepreneurs, proudly celebrating 10 years in publishing, recently ranked as the #5 startup in Austin. Before founding AG, he founded one of the first digital media strategy firms in the nation and also acquired several other firms. His resume prior includes roles at Apple and Kroger Foods, specializing in marketing, communications, and technology integration. He is a recipient of the Statesman Texas Social Media Award and is an Inman Innovator Award winner. He has consulted for numerous startups (both early- and late-stage), has built partnerships and bridges between tech recruiters and the best tech talent in the industry, and is well known for organizing the digital community through popular monthly networking events. Benn does not venture into the spotlight often, rather believes his biggest accomplishments are the talent he recruits, develops, and gives all credit to those he's empowered.

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28 Comments

28 Comments

  1. Jeff Brown

    April 9, 2012 at 12:53 pm

    Not sure what’s ‘regulating’ commission ceilings, unless you’re referring to market forces.

    Though I’ve known a few top producers who consistently get 7-8% on a large portion of their listings, since the late ’90s, they added value in return.

    I can’t see commissions rising, at least not industry wide. Just don’t see it.

    • Benn Rosales

      April 9, 2012 at 1:01 pm

      Nope, not market forces, they’re (regulation) real life reality on the ceilings on builders, and lenders that red flag transactions in residential real estate. I’ll investigate a little more and bring you a case study as I’ve had to deal directly with this issue. 🙂

      • Jeff Brown

        April 9, 2012 at 1:11 pm

        REO/ShortSale specialists have long told me about lenders ‘red flagging’ commissions they feel are too high. That’s ‘market’ forces, imho. They’re the 800 pound gorilla in those transactions, so the brokers knuckle under 99% of the time.

        There’s no gov’t agency of which I’m aware telling brokerages how much they can charge. Have I missed a new development? Thanks

        • Benn Rosales

          April 9, 2012 at 1:14 pm

          This is another article all together, Jeff. 🙂

  2. Greg Cook

    April 9, 2012 at 5:20 pm

    Benn, in markets dominated by REOs and short sales. the 3% is the ceiling not the floor. The banks dictate the commissions paid and they have absolutely no desire to pay for services rendered.
    The “wholesale approach” of awarding listings makes the concept of “value added” as archaic as a rotary phone.

    • Benn Rosales

      April 9, 2012 at 5:33 pm

      In that case, you would have to determine it by the hourly rate, and if you’re making less than minimum wage per unit on a case by case basis, and being required by a non-human, ie, a corporation to earn a wage less than the minimum based on any requirements set by that entity that would require you to work more than 40 hours in a work week, then you could potentially be seen as an employee and demand over time and benefits by that employer.

      Now if all you’re required to do is enter it into a database, and put up a sign, then yeah, 3% is a good day when and if the deal gets done – ever.

      Again, It’s your business model, and your decision, but in macro there is no shortage of properties that need to be sold making it even more competitive and more valuable.

  3. Brian Hickey

    April 9, 2012 at 5:21 pm

    Benn,

    Hope you’re right, though IMO the real estate transaction model is headed more towards direct-connection between buyers and sellers (of course, agents may play a part on one-side or the other).

    Under this model, which is perpetuated by the Internet, commissions will head south, possibly big-time.

    We’ll see.

    Thanks,

    Brian

  4. Cristine Gritz

    May 10, 2012 at 6:32 pm

    When we finally get to closing…we have made about a dollar an hour!!! LOL We spend a lot of time and money on our clients. It takes at least 30 days to close. We don’t make that much in the grand scheme of things. How many slam dunks do we get nowadays??? Not many. Buyers take their sweet time and Sellers want to price their listings too damn high. 3% just isn’t enough as far as I am concerned!

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Business News

So you were asked an illegal question in an interview, now what?

(BUSINESS NEWS) Interviews are nerve racking enough without having to wonder if your potential employer is playing by the rules. Be aware of these tips in case you find they aren’t.

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Interviews are universally nerve-wracking. You’ve got the resume, the references, the outfit – but you never know what your interviewer(s) are going to throw at you.

You expect questions relating to your skills and your ability to do the job, but sometimes a question comes out of left field and you’ve got to scramble for a coherent answer.

“If you were a pizza delivery man, how would you benefit from scissors,” asks Apple. And Gallup wants to know, “What was the last gift you gave someone?”

Well, when I ordered a pizza last night, I tipped the delivery person with scissors . . .

Unfortunately, some questions that seem just wacky, or harmless and friendly, are not just inappropriate to ask in an interview, but are actually illegal.

Illegal questions are generally those that request information irrelevant to the job description. Here are the most common categories of illegal questions, shared across all states:

  • Race
  • Color
  • Sex/Gender/Orientation
  • Military discharge
  • Religion
  • National origin
  • Birthplace
  • Age
  • Disability/Health status
  • Marital/family status

Any of this personal information could be used, intentionally or not, to discriminate against them. A direct inquiry regarding any of these topics is obviously off-limits, but sometimes the question might come from a tricky angle.

“When did you graduate college?” = “How old are you?”

With this information, employers could decide you’re too young or old for the role, no matter how qualified you may be.

“Orizaga is an interesting surname – is it Spanish?” = “Are you Hispanic?” A biased interviewer could use this information to determine that you are or aren’t a “good fit.” Similarly, “Is English your native language?” = “Are you from an English-speaking country or not?”

“Is that your maiden name?” = “Are you married?” And so on.

These questions are often asked innocently, by untrained interviewers looking to make conversation. Nonetheless, you don’t have to answer them, and your best bet is to tactfully avoid the question without demanding your constitutional rights in the middle of the interview.

Tone is everything, but if you respond to an illegal question with something along the lines of, “Is that relevant to this role?” in a calm, mild voice, most interviewers will take the hint and move on.

If the situation allows for it, you can keep your answer nice and vague without avoiding the question.

For example, if you’re asked about your college graduation date, you could say, “It’s been a while, but I still view college as one of the best experiences of my life.”

It’s important to note that asking an illegal question is not equivalent to committing a crime. The information must be used in a discriminatory manner, as determined by a court.

If you believe that an act of discrimination has been committed, you should contact a labor attorney, or file a charge with your local Equal Employment Opportunity Commission (EEOC) office. Then, order yourself a pizza and ask the delivery person about their scissors.

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Business News

10 time tracking tools for productive freelancers, entrepreneurs

(PRODUCTIVITY) We’re all obsessed with squeezing more out of each day, but what if we used one of these time tracking tools to inject more chill time into our lives?

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Part of today’s culture is seeing how much one can get done in a day. We’re always so “go, go, go” and we treasure productivity.

This is incredibly true for freelancers, and, as such, it makes total sense that app and software technology would capitalize on this need. The following apps and programs are designed to help you save time and/or increase productivity.

1. Timeular: This app is designed to visually show you how you spend your time and, as a result, become more productive. Instead of wondering where your time goes every day, you’ll see it visually. This is done through a physical time tracker, where you can define what you want to track and customize your Tracker. You then connect via Bluetooth and place the Tracker face up with the task that you are working on (if you’re taking a phone call, the symbol facing up would be a phone). It then tracks all of your tasks into a color-coded visualization of the day’s activities. Dangerous for people like me who waste a lot of time on Instagram…

2. Bonsai: This bad boy is time tracking for freelancers. You can break down each project and track time individually in order to see where your time is going and how much is being spent on each entity. You then are able to automate invoices based on the time spent. Genius!

3. Tasks Time Tracker: Say that three times fast. This is a phone app that has multiple timers so you can track more than one thing at a time. This app gives you the option to input billing rates to easily track your earning. You can then export all of the info in a CSV format.

4. Azendoo: Everything in one place. This is a time-tracking service that assists your team’s needs and workflow. It puts project organization, team collaboration, and time reporting all in one place. A cool feature on this is you can input how much time you anticipate spending on a project, and then Azendoo compares that to how much time you actually spent.

5. Continuo: Similar to Timeular, you get to see all of your activities in a color-coded format on a calendar. This lets you easily breakdown how much time is spent on each activity and allows you to plan for the future. You are able to see your progress over time, and see how you’ve gotten faster and more productive.

6. PadStats: Described as “a simple app will help you to learn more about yourself”, PadStats will help you track and analyze your daily activities or daily routine. This app includes more quanity-based tracking, allowing data to be more user-oriented and stats to be more accurate.

7. Pomo Timer: This productivity boosting app is a “Simple and convenient pomodoro timer based on the technique proposed by Francesco Cirillo in the distant 1980s made in a simple and clear design,” according to iTunes. For those who like visually simplicity, this app is for you.

8. Blue Cocoa: This program overturns the stigma of a smartphone being a distraction, by turning it into a productivity tool. You start by creating a timer and working on something, and, if you get distracted, the timer senses this and tries to help. This is all in an effort to keep you on track of your task, while tracking the time spent.

9. Timely: A fully automatic time app. This features automatic time tracking, project time management, and team time management. It works to improve timesheet accuracy, increase project profitability, and optimize team performance.

10. Toggl: This is a simple time tracker that offers flexible and powerful reporting. It works to crunch numbers that you’ll need for reporting, all while syncing between all of your devices.

Pick one or two of the above ten, and reclaim your time. No need to “go, go, go,” if you’re a more productive person – this way you can “chill, chill, chill.”

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Business News

This fake company weeds out crappy clients

(BUSINESS) The former CEO of Highrise used a fake website to weed out toxic clients. How can you keep problematic customers out of your business?

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Sorting through your client list to weed out potentially toxic customers isn’t a process which garners the same attention as a company removing problematic employees, but it’s every bit as important — and, in many cases, twice as tricky to accomplish. One innovative journalist’s solution to this problem was to set up a fake website to act as a buffer between unwanted clients and his inbox.

If you’re anything like Nathan Kontny, your inbox is probably brimming with unread emails, product pitches, and pleas from people with whom you’ve never met in person or collaborated; unfortunately, many of these “people” are simply automated bots geared toward generating more press for their services.

Nathan’s response to this phenomenon was to create a website called “Trick a Journalist” in order to see which potential clients would sign up for the service.

Hilariously enough, the trap worked exactly as planned. Anyone signing up for Trick a Journalist was blacklisted and prevented from signing up for Nathan’s CRM software, with Nathan’s justification being that the CRM software in question should never be used for something so egregiously predatory as Trick a Journalist.

By creating a product which sets apart unwanted clients from the rest of the pack, Nathan succeeded in both attracting and quarantining present and future threats to the integrity of his business.

While this model may not be practicable at face value, there’s an important lesson here: determining the lengths to which your clients will go to gain the upper hand BEFORE working for them is an important task, as your clients’ actions will reflect upon your product or services either way.

Ruthlessness in business isn’t unheard of, but you should be aware of your customers’ tendencies well in advance of signing off on their behavior.

Of course, one minor issue with Nathan’s model of operation is that, invariably, someone will connect Trick a Journalist to his brand and miss the joke entirely.

There are less risky routes to weeding out potentially problematic clients than blacklisting them via a satirical website — though one might argue such routes are less fun — but the end result is essentially the same: keeping unsavory clients out of your inbox and off of your product list.

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