How Agents divide the big fee
When you as the Seller sign a listing agreement with
Deborah Schilling’s Home Team to sell your Cape Cod Real
Estate, most ask why the fee is so high. Now, Buyers ask
the same question.
In most cases in business, the client (or customer)
pays the “bill” to the Accountant, Physician, and
immediately recognizes that the fee that is paid for
services does not go directly into the Practitioner’s
bank account. It is much the same with a Realtor who has
expenses with running a business.
The largest impact on the Big Commission is that
typically 75-80% of the sales in the Cape Cod and
Islands Multiple Listing Service are completed through
the “cooperation” of another real estate office. That
immediately cuts the commission in half, as the
commission may be divided with the Co brokering office.
Of the remaining fee left for our “side” in our
service agreement, there are those ongoing expenses
directly relating to a real estate business, as well as
others that relate to being Self Employed. We are
responsible for our own Health Insurance, commercial
rated auto insurance, fuel, maintenance and frequent
upgrade of a luxury level vehicle, errors and omissions
(malpractice type) insurance premiums, as well as our
own Social Security and Medicare contributions (double
the amount employees have deducted from their reliable
paychecks), our own personally funded retirement (no
pensions or retirement funds for Realtors). We do not
receive paid vacations, sick days or holidays. If we do
not work, we do not get paid.
Recurring expenses of running an effective real
estate business include, but are not limited to, print
advertising, Internet placement and advertising, Realtor
and MLS dues and fees, licensing fees, marketing
materials, postage and high quality color printing.
Postage for neighborhood and prospecting mailings and
the purchase of materials to make those appealing are
considerable. Substantial also are the fees for office
rental including shared personnel expenses, usage fees
for fax and copies, expenses of preparing and inputting
the listing, franchise fees and dues. We need and pay
for professional services for our business such as
attorneys and accountants fees. In our case, we have an
actual payroll for the Home Team, with its attendant
salary, benefits and payroll taxes. There are fees and
expenses with continuing education (mandatory) and
voluntary seminars and conventions necessary to stay up
to date and ahead of the changes in the market and
technology.
In the past, a telephone attached to a cord and a
simple monthly telephone bill was all that was necessary
to keep in touch with clients. Now wireless
communications may make it easier to stay in touch, but
at a considerably higher expense. Cellular telephone
bills, wireless subscriptions for email and web access,
fax machines and dedicated space and supplies at home
are all necessary in this seemingly 24/7 world of
instant messaging and immediate response.
The money we spend is easier to quantify than the
price tag on the hidden time agents spend. Successful
agents work 9 hours or more behind the scene for every
hour spent directly with clients. Most Sellers and
Buyers do not realize this. They think commissions are
excessive given the relatively few hours they actually
see agents working for them. Agents start working for
their clients long before they actually meet their
clients. Good agents spend over 20 hours per week
touring new listings and monitoring the status of
property currently on the market. If agents did not do
this, they would be unable to provide professional
guidance in the pricing of properties for sale, or in
the preparation of and offer by their Buyer client.
Agents preparing for a listing appointment often
spend hours researching prior to discussing the pricing
with the client. A 2 stage listing appointment often
takes between 2-3 hours of direct meeting time, to view
the property, discuss the market and the marketing plan,
and negotiating the final agreement to work together.
Even then, there is no assurance that the Agent will get
the listing, since many prospective Sellers are taught
to “interview” 2-3 agents. After the agreement is signed
then the listing is prepared for market, with the advice
and counsel of the Agent. This often includes
suggestions for making the property appeal to the
prospective Buyer, giving guidance and access to
professionals who can make repairs or improvements, the
actual input of the listing with measurements, photos
and virtual tours. Creativity and energy are required to
compose the marketing remarks for the Multiple Listing,
Internet and print ads, as well as print mailings and
email announcements. The actual process of showing and
selling the property by arranging and/or attending
showings, doing Open Houses, and Broker open houses is
very time consuming and stressful when trying to juggle
other time obligations.
As a Buyer agent, agents zero in on specific
properties only after meeting a client. The internet has
allowed Buyers to “preview” many homes, but this often
is more confusing to the Buyer. Meeting with a good
Buyer Agent will require at minimum of 1 hour of
discussion of requirements and wishes, as well as an
explanation of the process of purchasing and financing a
home. Showing properties may be a considerable effort,
if the client needs to become educated or comfortable
with market conditions before deciding upon one
property.
In any transaction, the hardest work for a good Agent
begins with the Offer. Preparing an offer for a buyer or
presenting an offer to a Seller is step one and requires
careful attention to what is important to the parties to
negotiate successfully for the client. Once an offer is
accepted, the hard work really begins, as there are many
more steps to the transaction before the Closing. It is
the careful management of these steps that prevents
misunderstandings, frustration or loss of the
transaction due to lack of follow through and guidance.
Discussing the transaction with appropriate
professionals, tracking the paperwork of the transaction
and insuring deadlines are adhered to, monitoring
deposits and inspections, and offering reassurance or
solid advice are both hard to quantify and impossible to
value in actual dollars.
There are too many circumstances where, in spite of
the most professional guidance and experience, that the
transaction does not close. In that case, other
tradespeople and professionals are paid for their time,
but not the Real Estate Agent. We work on commission
only, and even the most experienced and successful agent
understands that he/she may have spent thousands of
dollars on marketing and hundreds of hours researching
properties for prospects, only to have the Seller decide
not to sell or the Buyer decide not to buy. The agent is
left with no Seller or no Buyer and not one penny to
show for the effort.
Sure commissions are high. Real estate brokerage is a
labor intensive risky business with high overhead. The
least expensive commission that is paid is one that is
truly earned, and we at the Home Team value our clients’
investment in us, but we feel it is important to give a
perspective on that Big Fee. |
