Special offer

As a listing broker....how do you justify your high commission?

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

Can I have some more coffee?OK, here I go again, jumping into the Lion's Den. In today's post I want to take another shot at answering the question "As a listing broker, how do you justify your high commission?" My goal is to answer this question in a way that will satisfy, "the Sultan's of Short Sales, the Crusaders of Capitalism, and the Prophet's of Profit...Barry Cunningham and Barry Johnson" over at Real Estate Radio USA . I know, your probably thinking, "Broker Bryant, why are you wasting you're time with these guys?" Well.....it could be because I'm stubborn or.....maybe I'm just an idiot!! 

But, the real reason, is that I feel it's an important question and it deserves an answer. I had written a post on this topic back in November of ‘06 titled, "So what do you do to justify your high commission?" and in March of this year I went on Real Estate Radio USA to attempt to answer the question again. I wrote about it here, "Real Estate Radio USA and Broker Bryant Solve World Peace! Or Not!!"  I, also wrote, "Compensation or performance. Which one will it be?"  back in December of 2006.

Yesterday, Jennifer Allan of "Sell with Soul" fame went on the show to try and answer the same question. You can listen to her interview here. Jennifer had the same problem I did, trying to explain to the Barries how we justify our commission, without placing a dollar amount on every little thing that we do. 

In this day, of disintermediation and transparency, I truly believe that it is the intangibles that will make or break us. There is no doubt that Sellers can find everything they need, to sell their property on their own, online. Heck, they can even get their property placed in the MLS for just a few hundred bucks. And the reality is MOST properties, by far, sell through the MLS. I think the figure is about 85%. 

They do not need me to "market" their property and that's a fact. So why pay me x% to market their property? They shouldn't. If all they needed me for was marketing their property then I agree completely they are wasting their money. Hire a marketing company like "For Sale by Owner" and have at it. Just..... 

  • Be prepared to pay them upfront. 
  • Be prepared to arrive at your own pricing.
  • Be prepared to arrange all of you own showings. 
  • Be prepared to screen potential Buyers. 
  • Be prepared to negotiate your own deal. 
  • Be prepared to complete all contracts and disclosures required by law. 
  • Be prepared to deal with inspection issues. 
  • Be prepared to deal with unscrupulous REALTORS®, lenders and Buyers. 
  • Be prepared to deal with your own emotional issues with no one to turn to for advice and comfort. 
  • Be prepared to dispute a bad appraisal. 
  • Be prepared to find another Buyer when yours decides to walk at the last minute because you lost your temper with them over a $100 washing machine. 

All of these things sound very simple. However, anyone who has been in the business long enough knows that it's the small things that can blow a deal out of the water. Especially when emotions are involved. 

Of course, all of this assumes that you priced the property right from the beginning and that it was market ready. If not...then none of this other stuff even matters. A property is sold at time of listing. 

BUT....there are Sellers that are prepared to handle these things and if they are able....then they should. They do not need a REALTOR®. And they may very well be successful. I truly hope they are and wish them well. These folks are not my "market" and justifying my commission to them, is a waste of my time. And without a doubt....this group includes the Barries.

Now, if you are not in this group....give me a call and let's get together. We can then sit down, look at your situation and arrive at the best plan for you and your individual situation. I will then justify my commission to you. Fair enough?

MORE INFO FROM BROKER BRYANT... THE SOURCE FOR POINCIANA REAL ESTATE

Sell Poinciana Real Estate Poinciana Real Estate Poinciana Real Estate Poinciana Real Estate Agent

Copyright © 2008 http://www.brokerbryant.com/ | All Rights Reserved

Posted by

 

Join Our Facebook Fan Page Check Us Out On Google+ Follow Us On Twitter

 

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas

 

 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

 Copyright © 2017 http://www.brokerbryant.com/ | All Rights Reserved

Comments (98)

Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Very interesting post BB!  I think you are just a glutton for punishment!

As for Andrew Kyle's comment, we definitely have the right to charge a retainer for taking a listing or a new buyer on.  To be refunded at successful COE!

Will be back to read the interesting comments that you always spawn.  Maybe TLW will want to go on a bike ride with me so we can work on our pc asses :)

Jul 02, 2008 07:12 AM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

OK Brett, I'm going to approach this from a different angle for ya. First you need to clear your mind of any and all preconceived ideas.

I would never compare what I do to an Attorney or a Doctor. Although there are many Drs and Attorneys that suck at what they do. Just because they may be book smart does not make them good Drs or Attorneys. Nor does it make them a professional. I'm sure you can agree with that.

I also would never justify my commission by how much money I spend or solely on what I do to market a property. Even though the marketing is a part of it. Folk spay me because of what I bring to the transaction. It's a package that includes years of experience, knowledge, reputation etc..

Look at this way: As an advertiser why would I pay money to place an add on your blog site, website or show? Why can't I just go out and build my own website or blog site and place my own ads? Why can't I just advertise on Craigslist or a myriad of other free sites? I certainly have the knowledge to do so. I don't know how much you guys charge but I'm sure the cost to advertise far exceeds any set up costs that you incur. They pay to advertise on your sites and show because you drive traffic. This is an intangible that just happens to be the most important part pf the equation.

If you didn't have any traffic then advertising with you would be a a waste of money because you cannot justify the costs just by the things you do i.e. build a pretty ad and place it on your site. Anyone can do that. And many do. They are paying you because of what you bring to the table. And they know you are bringing things to the table because you can show them results. These results are due to the Barries personality and their knowledge and experience in marketing. There are folks that do exactly what the Barries do BUT if they don't have the personalities, knowledge and experience for it they will fail. The sites and show are NOT successful because of the way the ads are designed.

Here's another example: Let's say you were wholesaling a property. You went out and found a deal and placed it under contract with an assignable contract and then sold off your interest for a tidy profit. Why couldn't the end user have just done the same thing? Why should you be entitled to a tidy profit for just flipping a contract? It's because you had the knowledge and the time to put it together. Even though anyone(in theory) could do it, they don't necessarily have the inclination to do so. This is also an intangible.

There will be some people that will take advantage of today's technology to market and sell their own property. But there will be many more, by far, that won't. Those are the folks I'm looking for. Those are the folks that just want to sell their property and are willing to pay what I charge to get it done. They don't care how I do it.

We will NEVER be able to justify our commissions to you because you don't need or want our services. So trying to do so is an effort in futility. All I know is that in 14 years I have never had a seller that was disappointed in my services or what I charged. Even though I have had many houses that I didn't sell. That's just the nature of the business. I take NO responsibility for market conditions. That's out of my control. It's out of my control that they owe more than the property is worth. My sellers are my friends. They are far more than just a pay check. We do the best we can with what we have to work with. 

I care about the folks I work for and they know it. That's how I justify my commission.

I have sellers right now that I have been working with for 2 years. We may never sell their property because they aren't able to price it low enough. They are in their 80s and have health problems. We have no option but to try. The members of AR actually donated money so we could help them pay for a bankruptcy to get rid of bills they could no longer afford. They have nothing except their home that is too big and expensive for them. Earlier this year I worked with them for 3 months to negotiate their 11% adjustable rate mortgage down to a 6.25% fixed rate. Their property is listed with me pro bono to try and get the price closer to market value. I've spent many hours on the phone with them letting them cry on my shoulder when they get depressed. I worry about them daily. That's how I justify my commission which in this case will be nothing. These are intangibles.

I truly hope that the day never comes when you need a REALTOR(R) like me and many others who will help you solve your problems whether we get paid or not. But if you ever do..... give me a call. I'll refer you over to Century 21 :)

It's not what we do, it's how we do it. And you'll either get that or you won't. My guess is you won't. And there's nothing I can do about that.

Jul 02, 2008 08:00 AM
Real Estate Investing |Real Estate Investment
| Real Estate Radio USA - Fort Lauderdale, FL

on the air..i'll be back

Jul 02, 2008 08:10 AM
Terri White
LasVegasBroker - Las Vegas, NV

You are so right!  I actually had a seller ask me yesterday, while at the escrow company, "do you always go to your sellers' closings?" - I replied that I always do that, unless the sellers are out of town.  He thought that was unusual!  I guess sellers and buyers today are accustomed to finding the "best deal" in real estate agents and brokers.  I justify my fees by my knowledge, experience, education, designations and my willingness to go the "extra mile" to market a property and ensure a successful closing.  Unfortunately, in today's market, when transactions are more difficult, consumers are looking for even lower fees.  They do not realize that the listing is only the beginning; seeing the transaction through to a successful closing is where the real work is...and spending less money on commissions often results in a reduced "net" profit to the sellers.  If enough of today's deals fall out of escrow, maybe more sellers and buyers will recognize our value as brokers.

Terri White

Broker/Owner

Las Vegas Properties

Jul 02, 2008 08:29 AM
Spencer Hill
Hill Asset Management - Kingstree, SC
#1 Financial Planner -- South Carolina

The problem with the commission factor is this -- some listing agents just do not provide the service required for the fee they get, others go above and beyond. The typical agent puts the property on MLS and prays for a sale. The great listing agents have built a network of other agents who can bring them buyers and vice versa. The great ones know their market and how to price to market.

What saddens me is when I ask my listing agent what is an appropriate price, "what is the market price for my apt complex?" he answers, "what do you want to list them for". Then when they get a an interested buyer with sketchy financing they can't get me a contract with a ernest money. I'm willing to be creative to help close the sale. I'm not willing to pay an above average listing fee for subpar work.

A 10% listing fee for commercial property is ok with me if you get me the results i want. But don't ask me to cut my price significantly w/o you taking a lesser percentage fee.

Jul 02, 2008 08:36 AM
Maya Thomas, Broker
Tampa, FL
Please see my client recommendations.

As always, the HIGHEST caliber material.  Thank you.
Maya

Jul 02, 2008 09:23 AM
Susan Zanzonico
Berkshire Hathaway Home Services - Morristown, NJ
Sellers/Buyers Agent, Morristown NJ Real Estate

FSBO clients take a big risk and almost always end up coming out last. On the other hand, when FSBOs finally decide to list as they usually do, they already have a pretty good idea of at least some of what is involved in being a REALTOR and already have had enough.  They don't know the whole picture, of course, because there is plenty more when an offer comes in!!  Its a hard lesson for FSBO sellers and usually quite expensive as they lose time and money.

Jul 02, 2008 09:35 AM
David & Lisa Webber
RE/MAX Executive - Crofton, MD
www.webberteam.com

The bottom line is, as some agents have already mentioned, the sellers that pay for our services as listing agents want EXPERIENCE and EXPERTISE and want someone to handle everything for them.  The radio guys are experienced investors so the sales process is very familiar to them as it is to us.  But for many sellers, the selling process can be SCARY.  They ask questions throughout the process, wonder about many little details, want advise on what businesses are reliable that they can use (who is a good roofer that can repair my roof quickly, who is an experienced mortgage professional we trust, etc.). 

Many sellers will only sell a couple houses in their LIFETIMES, yet we sometimes sell a couple a week.  This is not their profession and they want a professional to guide them through.  Our experience and guidance is what they are paying for, not simply putting a sign in the yard and an ad in the multiple list system.  They want to lean on you, ask your advice about their decorating, how to make their home look the best, if an offer is good.  As we all know, advertising and getting the buyer is only part of the process. In this market, getting to settlement can be a real challenge.  Do we do the inspections?  No, but you bet we attend them.  We attend all settlements.  We, as professional Realtors, are there to answer any and all questions that our sellers have to make the process go as smoothly as possible. 

We also have a lot of liability and you bet your butt if something goes wrong with the transation, WE are on the hotseat.  We have to make sure the contracts are perfect, the inspections and negotiations go well, the inspections are negotiated, and on and on. 

Is the bar to entry as a Realtor set low?  Yes.  Too low?  Yes.  Can anyone be a Realtor easily?  Yes.  Is everyone a GOOD REALTOR?  No.  But the GOOD ONES are worth their weight in GOLD to most sellers.

Jul 02, 2008 10:31 AM
Lisa Lambert
The Law Offices of Elisabeth A. Lambert - Fresno, CA
Esq. 1031 Exchange Expert

Bryant:

I'm glad you followed up in a full blown post. I don't think GOOD agents need to convince Brett and the Barries of your worth as a listing agent. If your clients feel your services are worth your commission that's all that matters. So, agents, know your business, be prepared to provide value and the Bombastic Barries (sorry, I just couldn't resist, all in good fun :-)) will have little effect on any GOOD listing agent's business.

BTW, Brett I see here that you (Barry C) do mention buyer's agents being worth their weight in gold. You just didn't mention it in the comments on Jennifer's blog, the one I was commenting on and I believe Barry C made the comment, not you. If you're going to attack, please keep the blog posts straight. ;-)

Bottom line on which everyone can agree: we need to generally see a higher calibre of agent. The Departments of Real Estate need to make the licensing process and the disciplinary process more stringent to weed out more of the BAD agents that give you all a bad name.

Unfortunately, it probably won't cure the problem, see the attorney comparison. Every month I look at the Bar Newsletter (I think everyone would agree that the process of becoming a licensed attorney is more stringent than the one to become a licensed real estate agent) and see disbarments and disciplinary action against attorneys who have essentially been stupid, provided poor customer service, were greedy or irresponsible and, therefore, failed to fulfill their fiduciary duty. So, higher standards are not a cure all but they may be a good start.

Jennifer Allan, in her most recent blog post, talked about being the best agent you know.  Every one of us should be able to say that about ourselves or we are not performing to our abilities. And, if it is not within our capabilities to be the best agent, attorney, appraiser, doctor, stager, mechanic, etc., that we know, we should be considering another career path.

Enough said, I will step away from the soap box now. BTW, I would use a GOOD listing agent to sell my property.

Lisa

Jul 02, 2008 12:29 PM
Anonymous
Credit Cards Australia

Compare credit cards with Ausralia's leading financial comparison web site, Credit World

Jul 02, 2008 01:35 PM
#89
Christopher Ohlsen
Credit Werx, LLC. - Malone, NY

Brett,

 I hope that business model and schedule works for you! Its always nice to see people operate so efficiently, however I do know a lot of great agents who put a lot more work, time, and dedication into what they do for each client than what you have indicated in your comment addressing my "If I charged even just $100.00 per hour like a low priced attorney I would make out much better than I currently do" comment.

Another thing that I would like to point out is that as I said I am in a different yet related field. The structure of my work load is a bit different than that of a Realtors® although I do a whole lot of advertising for my Realtor® referral partners which I do not charge them for; instead I count on reciporcation.

I work a solid 50 hours a week as a Mortgage Professional and I invest a lot of time aside from my work to advertise for my clients. Just in working on mortgages with everything that goes into the process, especially with credit lending standards being tightened every day, I put in a minimum of 50 hours.

Not 50 hours per deal but I work steady on several deals which total 50 hours every work. Not one person would pay that bill but at 50 hours per week X $100.00 per hour I would earn $5,000.00 per week which I currently do not. I have some months where I earn half of that and some months where I earn less than half of that on a monthly scale but I do not consistently earn $20,000.00 per month as I do consistently put in 200 hours per month into my work.

So, as I said I am in a different yet related field and your scenario above does not work for my business.

Jul 03, 2008 04:35 AM
Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375
Flexit Realty "Flexible Home Selling Solutions" - Grand Rapids, MI
Real Estate Services You can Trust!

WOW, you received a blend of answers and comments on this one!  Nice update to the update Bryant.  I do think the intangible is the experience.  You have spent years going to classes, gain knowledge that is not charged directly to the client but certainly would change the results the seller is expecting without that experience.  Well deserved feature.

Jul 03, 2008 12:14 PM
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ

I recently took a trip to Nebraska to see my son, I hate to fly, and the price of the ticket was high in my opinion but when I saw how young the pilot was who was flying the puddle jumper from Denver to North Platte was I really didn't like the situation but when he landed that plane perfectly I was glad I got what I paid for. He was a professional who deserves every penny he gets paid and if folks don't like my fees they are welcome to call someone else or do it themselves.

TLW, If you have anyone coming to Riverside county don't get confused as there are more than one Cameron out here and I'm not Charmin.

Jul 03, 2008 02:22 PM
Neal Bloom
Brokered by eXp Realty LLC - Weston, FL
Realtor CRS-Weston FL Real Estate

Whomever discovered full service brokerage wasn't stupid.....obviously there are people who will pay for that type of service. So why would a person be willing to pay us our commissions that we charge versus going with a discount service? Maybe the consumer needs to justify why they should pay us.

Jul 04, 2008 12:19 AM
Tyler Wood
RE/MAX Big Bear - Big Bear Lake, CA
Big Bear Real Estate

You hit it right on the head Bryant.  There are always going to people who want to cut their own hair.  It is just their mentality.  Trying to convince them whey they should let someone else cut their hair is useless.  They will fight you to the end on this.  Some things just are the way they are.  The key is to understand that.  Some people like Keystone and some like Heineken.....it is what it is.

I choose to work with the people who value my experience, and to those that don't, good for them, that is their choice.

Jul 04, 2008 07:36 AM
"The Lovely Wife" The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

Cameron Wilson...

I know who you are. I would NEVER confuse you with anyone. You would NEVER say something like that to us. If you felt that way you'd have the b-lls to call me and tell me so. LOL...

I was in a mood when "The Broker Bryant" put this post up :)

I feel much better now. Sometimes we all just need to take a Blogging Break :)

P.S. Next time you swing by "The Crap-A-Rama" could you kindly throw those folks a new roll? Wink :)

P.S.S. I think I should get extra points for having the b-lls to post this comment :)

TLW...ROAR!

Jul 04, 2008 10:18 AM
Karl Nettgen
Century 21 Agate Realty - Gold Beach, OR

Be prepared to perform extensive marketing efforts, answer to people at any hour, review title and deed information, be prepared to work against all other agents and brokerages in the area that will do their best to market there listing and sell it instead of yours....a grim reality in a sof market

Jul 05, 2008 09:07 AM
Jim Lee, REALTOR, CRS, ABR
RE/MAX Shoreline - Portsmouth, NH
Buying or Selling? Ann & Jim are the local experts

It's really not all that hard to justify our fees if you break them down into individual tasks.

Here's an article I wrote for Realty Times in 2000 that breaks down expenses for a listing at that time.

When asked to explain what value he brings to the transaction Jim Lee, Knoxville's Realtor of the Year knows exactly what his time is worth. He offers the following chart for Realty Times readers to consider, and has based his conclusions on a $75,000 annual income

 

Description      Time      Dollar Value*

  • First Visit 1.0 hrs. $40.00
  • Comparative Market Analysis 2.0 hrs. 80.00
  • Listing Appointment, measure, consultation 3.0 hrs. 120.00
  • Install Sign and Lock box .5 hrs. 20.00
  • Photography, film, development 2.0 hrs 50.00
  • Hold Broker Open House including refreshments and promotion 4.0 hrs. 385.00
  • Advertising preparation and placement including Internet 6.0 hrs 240.00
  • Write, Record, and Install "Talking House" radio transmitter 3.0 hrs 120.00
  • Prepare brochure box flyers and deliver (initial 100 flyers @ $39.00) 2.0 hrs 119.00
  • Preparation and Cost of Graphics 1.0 hrs. 65.00
  • Deliver Graphics .5 hrs. 20.00 Preparation and Cost of "Just Listed" Cards 3.0 hrs. 130.00
  • Postage for Mailers 41.25 Preparation and Cost of Picture Postcards to Agents 3.0 hrs. 168.75
  • Weekly Communications** 8.0 hrs. 320.00
  • Scheduling Appointments** 16.0 hrs. 640.00
  • Follow-up on Showings** 8.0 hrs. 320.00
  • Negotiations 6-12.0 hrs. 480.00
  • Pending Follow-up 6-12.0 hrs. 480.00
  • Meet Mechanical Inspector 3.0 hrs. 120.00
  • Meet Termite Inspector 1.0 hrs. 40.00
  • Meet Appraiser 1.0 hrs. 40.00
  • Review Settlement Papers 1.0 hrs. 40.00
  • Closing 1.0 hrs. 40.00 TOTAL: $4,191.00 *

Based on a $75,000 annual income **Based on a 16 week listing period. All estimates of time are typical marketing activities.

Lee adds that the chart does not count his "years of experience, expertise, educational courses, contacts, professional reputation, equipment, (computers, cameras, etc.) Multiple Listing Service, support staff, and many other benefits. "I don't know how to put a price on the value of experience, education, time in the business, etc," says Lee. "I don't believe there is any way to assign a value to that. However, it becomes priceless to me and to a seller that has an appraisal problem or a buyer with a credit glitch that needs smoothing out."

You should be able to modify

Jul 08, 2008 01:35 PM
Susan Zanzonico
Berkshire Hathaway Home Services - Morristown, NJ
Sellers/Buyers Agent, Morristown NJ Real Estate

Thats an interesting breakdown. We all know that plenty of other little things/issues crop up inbetween.

Jul 10, 2008 06:37 AM
Kelsey Barklow
Hurd Realty - Johnson City, TN
423/948-9154

Great blog. I was not able to read every comment so I'm not sure if anyone addressed this but can I have your permission to use your bullet points in my FSBO packet? You hit the nail on the head.

Aug 28, 2008 03:17 AM