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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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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

Calvin Klein skips stores, opts for Amazon – smart or suicide?

(BUSINESS NEWS) Calvin Klein takes a creative step that may increasingly become common, but is it still risky at this stage?

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Calvin Klein has announced that it is taking a new approach this holiday season – instead of giving department stores access to its new stuff – online giant Amazon gets all that awesome underwear and denim first (here). Department stores won’t have access to their line until after Christmas sales have ended.

Wait, what?

It’s not a bad idea though. Basically, CK is following the money trail and with more and more consumers going to Amazon as the online shop of choice, compared to the thousands of stores closing across the country for the retail sector, it makes sense.

CK’s new approach is innovative- in addition to going online, it’s got two in-person pop-ups to create a new shopping experience that integrates Amazon Alexa devices and a highly personalized shopping experience. For example, you could literally see how those jeans pop in the club by having some delicious dance track play on Alexa and some clever lighting – dude! The pop up stores won’t even have prices, they just use the Amazon app to show relevant, changing prices (thanks to robots with algorithms).

How this new approach and unique shopping experience goes for this brand is going to set a new tone possibly – if it’s successful.

Amazon is set to benefit in its broader exposure and exclusivity (as though you needed a reason to shop at Amazon – I sure don’t!) of the relationship, but more importantly, as Amazon moves into fashion with things like “Prime Wardrobe” and seven new private-label clothes brand it’s set to become a great place for clothing. Earlier this year, Nike began selling on Amazon as well, so while CK isn’t the first to jump on it, it’s certainly doing it in a unique way.

Sadly, the pop-ups are only in the bougie locales of New York and Los Angeles, but everyone else should check out the customer site for all those good denim jackets, I mean, jeans. In terms of marketing, Model Karlie Kloss and YouTuber Lilly Singh are influencing the campaign, creating a one of a kind mix of fashion, technology, and engagement.

The great CK experiment is proving to be a fascinating show – and has some big implications for future retail.

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Working through job interview adrenaline and anxiety

(CAREER NEWS) Find out how to use the pressure and adrenaline of a face-to-face job interview to your advantage.

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It’s undeniable that there is a certain amount of adrenaline that flows through you during a face-to-face job interview. You’re theoretically vying for a job you really want (or need), so you have to make sure that you put in your best effort.

Even under the best of circumstances, this can make you feel like you’re in an interrogation room being asked what you were doing the night of December 2nd, 1997. This is where that adrenaline can come into play, which can make things harder – just make sure you’re properly utilizing it.

First off, use that adrenaline to get you to the interview location with plenty of time to spare. No employer values tardiness, and it’s good to walk into a high-pressure situation with all of your ducks in a row.

Being early also gives you a chance to get a feel for the environment and gives you a chance to make an impression with the receptionist. Speaking as a former receptionist, this is not something you should overlook as our opinions are often asked by the employer.

Once you’re in the interview setting, use the adrenaline to keep you engaged in the conversation. An important aspect of this is making eye contact.

Don’t confuse this with being creepy and staring without blinking. Just be sure to look into the eye of the person you’re speaking to, and be sure to share that eye contact with others if you’re speaking to a panel of interviewers, keeping a happy, interested (but not scared or overly enthusiastic) look on your face.

With rushing adrenaline, you may use self-soothing movements like playing with your hair or wringing your hands. You may exhibit anxious movements like toe tapping. Don’t do any of these things – they’re within your control. But if something like a shaky voice from these nerves are not within your control, apologize up front (“Apologies for my shaky voice, I have normal interview jitters, I usually speak like a normal human person”) and move on.

Depending on how the interviewer leads the conversation, the entire interview doesn’t have to be this stiff discussion. If given the opportunity, use this time to work in some small talk so they can see the personable side of your personality. For example, you can keep it related to the situation by making small talk about the traffic and asking how the interviewer typically gets to work each day (buying time is another great way to work through the anxiety of rushing adrenaline).

Throughout the course of the conversation, whether the small talk or the interview itself, make sure you’re showing your true colors and not lying. It isn’t hard (especially these days) to be caught in a lie, so don’t waste anyone’s time with the nonsense.

Once everything is said and done, say your thank yous and your goodbyes and make your way to the exit. Don’t try and overstay your welcome or linger in the lobby, just be on your way. But, don’t forget to send a courteous “thank you” email.

Above all, remember that everyone is nervous in a job interview situation – you’re not alone!

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If Amazon puts HQ in Chicago, they’ll get a cut of their workers’ income taxes

(BUSINESS NEWS) Amazon continues the hunt for a new city to set up shop, and cities across the nation are offering plenty to attract the brand.

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If Amazon sets up a new headquarters in Chicago, the company could get over two billion dollars in tax breaks, including $1.32 billion from their workers’ income taxes. How would they achieve this fiendish feat?

With the magic of personal income tax diversion, where employers withhold state income taxes from employee paychecks. Workers still pay full income taxes, but the company holds onto all or part of the funds.

This happens when a city says to a business, “please come live here, we want your money so much you can just not pay taxes okay?” In this case, both Chicago and the state authorities of Illinois presented this offering to Amazon.

In September, Amazon announced plans for a second headquarters, which was very originally dubbed Amazon HQ2. The new headquarters is intended to supplement the existing one in Seattle. Amazon intends to spend around five billion on new construction alone, and said it plans on having 50,000 workers at HQ2.

Amazon outlined core requirements for HQ2, including access to mass transit, metropolitan population of over one million, and up to eight million square feet of office space just in case they need to expand even more. Proximity to major universities and airports with direct flights to New York, San Francisco, Seattle, and Washington D.C. were part of the optional rider.

At least 238 other bids have been made for the headquarters. Chris Christie proposed paying Amazon up to $10,000 for every job created even though New Jersey has $60 billion in unfunded pension obligations.

Plenty of other cities want to take Amazon to prom too, and have launched promotional campaigns to stand out from the crowd. One Arizona economic development firm sent a 21-foot cactus, which was rejected due to Amazon’s corporate gift policy. Don’t worry about the cactus’ feelings though, it was donated to the Arizona-Sonora Desert Museum.

In another proposal, Kansas City, Missouri mayor Sly James purchased one thousand Amazon products, donated them to charity, then wrote five star reviews for every item, which all included shout outs to Kansas City’s positive attributes. James either has way too much time on his hands, or employs very productive interns.

This lovely display of cities offering incredible legal loopholes for Amazon is pretty heartwarming. After all, the company is definitely in need of financial help and government perks. Except that oh wait, founder Jeff Bezos is currently the only person in the world worth over $100 billion dollars.

Amazon’s soaring share price added around $43 billion to founder Jeff Bezos’ personal fortune this year, and Black Friday alone raked in $2.4 billion. There’s also all that fun stuff about subpar
workers’ conditions in Amazon’s warehouses that we all pretend to forget when there’s free two-day shipping on that thing you really, really want.

So far, Amazon has yet to accept Chicago’s tax-tastic bid, or any other offer. Based on the list of requirements, Moody’s Analytics released a data-specific analysis of the top cities.

Austin, Texas topped the list, followed by Atlanta, Philadelphia, and Rochester, New York. Other contenders include Pittsburgh, Portland, and New York City.

Amazon will announce the final site selection and plan sometime in 2018.

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