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I have been in the Real Estate industry for 32 years. During that time, I have consistently heard from Agents that their brokers simply take too much of their commissions. Over the past three decades, many changes in Brokerage models have come about. In almost every instance, it has been disguised as a benefit to consumers as it will reduce the cost of the transaction. That assumes that if the agent receives more they will pass that savings on to the consumer. Nothing is further from reality. By making it about the dollars the agents can earn, it harms the consumer because agents simply facilitate transactions in the simplest way to “get the transaction closed” so that they can get paid. Simply reducing the cost of the transaction is NOT the key to benefiting the consumer. The key is to greatly improve the professionalism of the agents representing consumers. This will never be done by providing agents more commissions without requiring that they improve their professionalism. Are they going to use the additional dollars received to educate and train themselves to be better at representing properly their clients or customers interest? Does the broker really care if its only about the number of transactions done? The whole real estate distinction between a “client” and a “customer” demonstrates the inability of the industry to understand their responsibilities to their principal in a transaction.

What agents should be looking for is a brokerage where education and doing things right is a focus. One who knows the clients interest are first. It should have qualified staff people who can assist in every element of a real estate representation. It should have systems in place to facilitate the review of transaction documents on a timely basis to ensure accuracy and obtain digital signatures. The brokerage should be monitoring the changes in laws, delivery systems, and the practical barriers to properly completing transactions and protecting the client’s interests. The pressure from consumers to reduce commissions is due to their belief we are nothing more than a scribe writing out a transaction on a prescribed pre-printed form. Sound familiar? How many of you if you were legally wronged would search out the cheapest attorney you could find versus the best available? If they were the least expensive, would you complain when that attorney didn’t get the result you hoped? What would you expect from your client?

We need to be creating brokerage models that enable Brokers to increase professionalism and value to the public, not models that claim to benefit the consumers by reducing transaction costs. Providing ongoing education and individualized quality representation is going to be necessary to avoid being priced out of the market by a faceless technology company. Let’s analyze what we pay our brokers by what we receive from them and how that benefits our clients by helping us provide professional representation!

Just a thought!

I am seeing lots of “Fuzzy Math” these days. It is in the form of a recruiting pitch to agents telling them that they can keep 100% of their commissions. Well, we know that is not true as the sponsoring broker will have to have a method of earning back the amount put out for office rent, utilities, equipment, employees, telephones and back office systems. Additionally, a broker will want to be compensated for paying all these expenses up front as well as for his/her time in managing the office. Then, of course, there is the dreaded “profit” for the Broker. Now come the claims that you can not only get paid 100% but that the Franchisor and the Franchisee will provide you with systems, training, and support. People to do this and the systems themselves cost money. These are substantial expenses. So now, you have a Franchisor and a Franchisee who are apparently paying out of their pocket for the expenses necessary for you to carry on your business because you get 100% – right? I know, they also pay you for bringing in other agents and even though they claim they are attracting the best they are apparently attracting anyone who will sign and was recommended by you.  See what I mean about “Fuzzy Math”?

They get paid by a monthly fee so the “more” agents in the office, the better (what was that about quality?), and they receive a fee per transaction-side closed. Nothing they receive is based on the quality of the work, the value the agent has to the client, or how the client feels about the work performed. If you flame out, there are always other agents to replace your monthly fee and your transactions. Sounds like a perfect way to help commoditize what real estate agents do – which helps the big boys replace agents and reduce their compensation (think Uber and Expedia).

What commissions you charge are up to you but without standards commissions often get discounted. So, let me see, 100% of 2% is 66.6% of 3% or a one-third reduction in pay. But nobody in the brokerage cares because they get the same amount regardless of what you get. That makes what you receive far less than that other brokerage that wanted a reasonable percentage. Now let’s throw in opportunity! I know, you want your signs and cards to only advertise you! Forgetting the fact that to do so in most states violates the Real Estate rules and regulations, the only marketing you get is from your listings. Every sign promotes you as well as the listing agent in the other brokerage. Isn’t about making the phones ring and being seen on the internet? Then there is that pesky SEO.

If you need to make more money, work harder and smarter. Find a broker that thrived in the market downturn (even a blind squirrel can find lots of nuts under a nut tree in a good nut year) and learn how they did it. You shouldn’t be focusing on getting more agents for them to supplement your compensation. (Are you a Real Estate Professional or a head hunter?) Focus on selling more real estate and satisfying more client’s needs. Find a brokerage where education is important. It should have qualified staff people who can assist in every element of real estate representation and systems in place to facilitate the review of transaction documents on a timely basis to ensure accuracy and obtain signatures digitally. The brokerage should be monitoring the changes in laws, delivery systems, and the practical barriers to properly completing transactions and protecting your clients interest. If they aren’t, how will 0% sound when your license is revoked for something you weren’t even aware of? Professionally representing your client and assisting them in achieving their goals ethically, legally, and responsibly will be the only way to thrive in the future. After all, have you heard any rumblings about attorneys or CPAs being replaced by technology? Like other professionals, it’s the personal and individualized attention to clients’ needs that prevents us from being replaced by a machine and enables us to charge a reasonable fee based upon our skill, expertise and knowledge! In the end, it’s not about the split, it’s about how much you make and keep at the end of the year and how long you can do it! Make your choice intelligently after analyzing all the facts and don’t rely on their “Fuzzy Math”!