Category: The Industry

Do-It-Yourself

Most people don’t want to attempt the sale of their own property without professional help.  That’s smart.  There are so many things that can go wrong, so many landmines on that path; and these are BIG things that can cost a lot.  Still, when the alternative of paying, say . . . $15,000 or more in sales commissions is considered, some elect to brave it on their own.  And sometimes they’re even successful.  Most of them, however, say they’d never do that again!

The problem with Do-It-Yourself is the definition of ‘it.’  What is it you are going to do yourself?  The whole thing?  Pricing? Preparation? Marketing? Screening? Showing? Open houses? Contracts? Arranging financing? Handling details? Solving problems?

Frankly, I don’t like that definition of ‘It.’  It’s too big.

But, what if we defined ‘It‘ as simply being those things any capable homeowner could do for him or herself?  What if we pull out all of the technical aspects of selling a home, all of the tasks that take specific knowledge and experience, and shortened our list of ‘It‘ to:

  • Showing the home (I know:  50+ years of REALTOR-speak has conditioned us all to believe we can’t do this well, but, come on:  who knows your property better than you?)
  • Holding open houses

Now, that’s an ‘It‘ I can live with! Especially if it means ‘It‘ can save me big bucks!

And, guess what:  it can.

You see, one of the many things Don Taylor, the founder of Help-U-Sell, questioned about the Ordinary real estate business way back in 1976, was the role of real estate agents in the typical office and the expense associated with having them.  Instead of a real estate office with 50 or 100 agents stumbling around doing half a dozen deals a year each (which, by the way, is a true picture of what an Ordinary real estate office is:  that’s  normal for them), he wanted a handful of agents, focused on a specific job description, doing four or more times the average production of agents elsewhere.  To realize this vision, he looked at the list of things agents have to do in a real estate sale – which is similar to our big list of of ‘It‘ above – and tried to pare it down.

He recognized that most agents spend huge amounts of time opening doors for people and sitting in open houses.  Overheard at a REALTOR meeting:

What did you do last Saturday?

What a day!  I had to show one of my listings in the morning – someone called and wanted to see it.  I drove 30 minutes to get there, waited another 30 minutes  . . . and they didn’t show up.  So, that was my morning.  Then I had an open house in the afternoon, which meant I needed to start an hour early putting out signs and making sure the house was ready to show .  And then it rained all afternoon, remember?  Hard!  I sat there for four hours with my lemonade and cookies and didn’t see another living person.  

Gee, why didn’t you just close up shop and go home?

Believe me, I wanted to, but I promised the seller two open houses and this was the day they chose, so I was stuck.

Don decided that a typical homeowner – carefully prepped by a sharp agent – could easily show his or her own house and, with a little more preparation, hold an open house.  That would save a lot of time in a typical agent’s career – and saving time saves money.  Whose money, you ask?  In Don Taylor’s mind, it saved the homeowner money.  After all it was the homeowner taking over these simple tasks that steal agents’ time.  With a seller participating in this fashion he would need fewer agents and could charge less.

There’s more to how Help-U-Sell brokers are able to charge less and still make more than their Ordinary counterparts.  There is a ton of difference in how Help-U-Sell offices approach the business – marketing, lead capture, incubation, transaction processing – but for now, we’ll stay focused on this one aspect:  Seller Participation.

Think about it for a moment.  You’re a home seller.  It’s a beautiful Thursday afternoon.  You’re home, working in the yard.  The house is neat and clean . . . what the heck!  Why not put out the Open House sign and a few directionals.

Meanwhile, Ms. P, always looking for her dream home, takes a new route from the grocery store and finds your open house.  After a bit of friendly chatting, you get her name and contact information (your agent prepped you well), and take her through the house, which she loves.  She wants more detail and might want to make an offer.  You hand her your broker’s card and tell her he will be in touch.  You wave goodbye.

You call your broker, who calls Ms. P, has her come to the office to answer her questions and have her pre-qualified for a mortgage.  Then he brings her back to the house for a more in-depth tour.  That evening, he comes back with her offer and earnest money check.

You found the buyer yourself.  There was no outside broker or agent involved.  When the sale closes, you’re only going to have to pay your Help-U-Sell Low Set Fee.  It is a successful sale – and you saved thousands of dollars in commissions!

That’s a Do It Yourself I can live with!

 

Why Isn’t Help-U-Sell Growing Like a Fungus in the Tropics?

I get asked that question a lot:  how come Help-U-Sell hasn’t exactly blossomed forth over the past half dozen years?  Why are new members of the franchise so rare?  Why has the number of offices remained, well . . . stagnant?

I understand the question.   After all, I’m ranting away like a maniac about this wonderful new way to sell your house, but, in the words of Clara Peller, “Where’s the Beef?!?”

Here’s the key:  Help-U-Sell is a competitive advantage for brokers working in  normal, equity-seller markets.  Our ‘Sell for a Low Set Fee and Save Thousands’  offer to homeowners is so superior to what Ordinary brokers have to offer that we win by a mile . . . when equity sellers in a normal market seek real estate services.

But what has the real estate market been for the past six years?  Um, let’s see . . . how about Devastated?

Almost everybody was upside down:  their homes were worth less than they owed.  Millions lost their jobs or, worse, got sick and couldn’t pay their mortgages.  Lenders took them to foreclosure.  Others who simply needed to sell, found that the only viable route was the Short Sale.  The market quickly shifted from equity-sellers to REOs (foreclosures) and Short Sales.

In an REO/Short Sale market, the decision makers in a real estate sale change.  It is no longer Bill and Sally Homeowner.  In an REO/Short Sale market the decision makers are Banks and Lenders.  They call the shots.  They decide which company gets the listing.  They decide what the broker will be paid.

From 2006 – 2012, Banks and Lenders decided that real estate brokers would be paid a percentage based commission – usually in the 5% range.  They didn’t know anything about Set Fee pricing except that it was something that Coldwell Banker, Century 21, Re/Max and Keller Williams DIDN’T do . . . and frankly:  they didn’t care.

So, the Help-U-Sell superior offer to homeowners who need to sell was neutralized.  The competitive edge we have always enjoyed evaporated when the person making the selling decisions became . . . a bank.

We shrank   Oh, how we shrank.  But we didn’t become extinct.  Many others did:  Advance, Nextage, and thousands of individual offices all over the country.  The Help-U-Sell brokers who survived learned how to talk to Banks and Lenders, how to get and market REOs and Short Sales, and made it through the harshest real estate market in history.  Many not only survived, they thrived.

We’ve had many inquiries about franchise opportunities over the period, but it’s a different universe than it was in 2005.  Back then, a sharp person, with the desire to open an office, buy a Help-U-Sell Franchise and set the world on fire had sizable equity in their home to fuel the opening   Lenders were almost throwing money at anyone wanting to start up anything.  Today it’s very different.  Home Equity is rare.  And Lenders have become so tight with their money.  Anyone wanting to start a Help-U-Sell company pretty much has to have the one thing they never had to have in the past:  cash.  And that’s a rare commodity in today’s world.

But here’s the thing:  the real estate market in 2013 is waking up.  It’s shrugging off the hideous downturn of the past few years and is starting to come back to life.  In some markets, inventory has disappeared at such a pace that a new desperation has set in for home buyers.  House values are rising, and rising rapidly.  People who were upside down last year suddenly have equity!

And when homeowners have equity . . . well, THAT’S when Help-U-Sell thrives!

Every homeowner watching their equity return realizes how precious that equity is.  They don’t want to squander it on real estate commissions when they sell.  What could be more absurd?

Bill and Sally, after five years of being upside down, finally have equity in their property.  Today it stands at $30,000 and it seems to be increasing at an annual rate of 5%.  But here comes an  Ordinary Broker charging a percentage based commission that will have Bill and Sally paying $18,000 to sell their $300,000 house!  They are faced with giving MORE THAN HALF of their new equity to a real estate broker . . . and that sure doesn’t feel good!  When they learn that there is a low set fee alternative in the market place, they are going to dial Help-U-Sell with a passion!

To every thing there is a season . . . and, get ready:  this is the season of Help-U-Sell!

 

 

 

 

How to Fix Your Broken Real Estate Company (before it’s too late)

Mr. Richard Feder from Fort Lee, New Jersey writes:

‘Dear Set Fee Blog.  I have been reading your posts for some time and am convinced that my current real estate company business model – what you call ‘Ordinary’ – is antiquated, out-of-touch with consumers, and, well . . . it sucks.  But I don’t know how to go about changing it without firing all of my agents, shutting the doors and starting over.  Help me, please.  Tell me how to go about abandoning the tired old agent-oriented model and converting to a shiny new consumer-centric,  set-fee model.’

Dear Mr. Feder.  Thanks for writing and, believe me, you are not alone.  I am considering starting a 12 step program for Ordinary Brokers and I’m sure the meetings would fill fast.

But first, let’s understand that the kind of change you’re talking about is HUGE.  It’s not just a simple matter of altering how you charge consumers or how you offer your menu of services.  Even a well-studied outsider would probably screw it up without expert coaching.

I am a good example.  I came to Help-U-Sell in 2004 as an outsider, hired to do a job:  upgrade the company’s University.  It took three months before I had all of my old paradigms out of the way and could see Help-U-Sell for what it really is:  a bold new way to deliver excellent service to consumers while making a healthy profit in real estate.  You have to question all of your assumptions, all of your beliefs about how the business works.  And you have to change from the core outward.  ‘ Sell Fast – Save Thousands’ is just the outward expression of a ton of tweaking behind the scenes. Nonetheless, here is what I suggest:

Start carefully monitoring the lead flow in your office.  Where are the leads coming from?  What (and who) is generating them?  What portion of the incoming leads are coming from company sources as opposed to agent sources?  You want to consider this to know how much business your company is likely to do in the event all of your agents pack up and leave; which is a possibility if you go through with the change.

By the way, ‘carefully monitoring the lead flow’ means to monitor it like it’s never been monitored before.  You want to get source information on every single inquiry, whether contact information is gotten or not.  You want to know why everyone, even the caller who was a nutcase or the one who simply hung up, called your office.

I don’t think you can realistically expect your current staff, and certainly not your current agents to do this.  My suggestion:  hire someone (or convert your best office admin) to handle ALL phone and Internet inquiries.  One person through whom all incoming traffic is routed.  This person collects source information, handles the inquiry, collects contact information and then turns the lead over to you for assignment to the appropriate agent.  By the way, if yours is a big office, you probably need more than one person doing this important function.

Try to maintain your sense of humor as you review the data your new call coordinators are collecting.  You’ll probably discover that many of your agents, in fact, most of them, have been living off leads YOU generated.  You’ve been paying them huge splits to generate their own leads, do their own marketing and so on . . . but it has been YOUR marketing, your investment in signs, facilities, web presence, and advertising that has been causing consumers to contact the office.  Surprise, surprise!  It’s time to wake up now.

As an aside, I once did a modified version of this exercise with an Ordinary broker who had a ‘Top Producer’ who did about 30% of the office’s production.  The broker spent most of his days living in fear that the agent would leave.  When we did the analysis we discovered that more than half of that agent’s production came from office-generated leads.  Then we put a pencil to the company dollar she generated (after the huge split she was paid), deducted a factor for what it cost to produce those company-generated leads and discovered that the broker was probably losing money every time TP closed a deal!  He was making more from some of his less productive people.  He said goodbye to TP then watched as everybody became more productive and his bottom-line improved.

Start calculating what it actually costs you to market a properly priced listing.  Don’t consider what you have to pay a listing agent.  We’re only looking at hard costs here:  how much marketing, how many days of office operation and so on.  Be aware that whatever number you get today may be different tomorrow.  Cost to market a listing varies in direct proportion to days on market.  If your marketplace slows and DOM goes up, so will your cost to market a listing . . . so take your figure and add a ‘fudge’ factor – say 25%.

Now consider:  is there a way to effectively accomplish the successful marketing of a listing without paying an agent 70% or more?  This involves carefully examining what a listing agent actually does.  We could go through the whole laundry list here and then we could demonstrate how almost all of it could be done much less expensively . . . but instead, let’s just acknowledge a fact you already know to be true in you gut:  You’re paying that agent 70% NOT to sell the listing, but to GET the listing.    It’s the damndest thing!  Today, we pay listing agents at closing not for getting the listing sold – listings, properly priced and plugged into an effective marketing program pretty much sell themselves – but instead as a reward for bringing business into the company.  In other words:  for getting the listing.

Now your task is becoming clear.  You must create marketing and administrative systems for standardizing the marketing of your inventory.  You have to take marketing BACK from your agents.  You need to design it, orchestrate it, hire the admin staff to get it done.  Marketing has to transition from being idiosyncratic – created willy-nilly but a pack of individual agents who have widely different ideas about marketing – to being automatic . . . standardized, monitored, controlled and adjusted by you.  In your new universe you’ll be plugging your listings into your already operating marketing system, not designing a whole new marketing program for every listing you take.  Its a very big shift.

Then you have to take BACK the ‘getting’ of  listings from your agents.  You and your team of assistants now need to be in charge of this inventory procurement function.  I am aware that the faint of heart, having read this far, are now shutting down their computers. Oppressed by their own paradigms, they cannot envision a world in which listing inventory is secured without agents.  But I assure you it can be.  It starts with an examination of your seller offer:  what do you have to offer that is, far and away, better and different than most of your competitors.  If – like most real estate brokers – your offer is identical to every other broker’s, you have a problem.  You’re going to have to refine who you are and what you have to offer until you stand out from the crowd and are thus, easy to spot by consumers.  Then you must market that offer.

Once your offer to sellers is fine tuned and really different, you will discover that it is much easier to present.  Your listing consultation will look something like this:

  • Tell me everything I need to know about your move
  • This is who we are and how we work
  • This is what makes us special and different
  • Here is what our past clients say about us
  • This is how much we can realistically sell your house for and what you’ll likely net
  • Sign here

If you take out all of the fluff and show-biz most listing agents trot out during their presentations, this can be accomplished in, oh, 30 minutes of less.  When you have a better deal to present, you don’t need the smoke and mirrors, the fluff and show-biz to get the listing.

Up until now, most of this could be done in stealth mode.  You could do your research and preparation without telling your agents.  But now that all the ducks are in a row, everything is lined up and ready to go, it’s time to call a special meeting.

Present the state of the company – get right down to profitability.  I don’t know what yours is, but if you’re like most Ordinary brokers your company is making less than 5% profit – which is obscene considering the risk owning a real estate company involves.  Get their buy-in that that’s a pitiful bottom line for a fine real estate company like yours.

Then present your solution:  you are going to become a lead generating machine, which means taking back marketing and investing in it heavily.  They will like that.  But, you’re also going to take back the listing function.  You will no longer need agents to find consumers – you’ll be doing that with marketing.  What you will need agents for is handling the buyer leads your marketing and your listings generate.  You anticipate that a good buyers agent in this new company you are building should close in the neighborhood of 20 transactions this year – all basically fed to them by the company marketing program.   You may now invite all who are not interested in this opportunity (which will be most) to leave.  Now, interview the ones who are left.  Since you will be shouldering the financial burden for lead generation, who on your remaining staff would you trust with the important task of converting them to sales – for a much more reasonable 50% split.

At the end of the day, your office population may have dropped from, oh, 50 agents and 3 admins/assistants to 5 agents and 4 admins/assistants.  You can now begin to look for smaller, less expensive space.

By the way, all through this process, it’s a good idea to contact Ron McCoy at Help-U-Sell for advice and to begin a conversation about becoming part of the family.  The Brand will help you through the transition and position you properly for maximum impact in your marketplace.

As you start to walk down this new path, you will begin to feel as if you are waking up from a very long nap.  Real estate will look new and it will be exciting again. You will be filled, even driven by a new sense of purpose:  the mission.  You’ll work harder and have more fun than you have in years.  And, in six to nine months, your personal bottom line should be way ahead of where it is today.

Ordinary Test Explanation

It struck me that providing a rationale for each of the ten questions in the previous post would make sense.  I mean:  Ordinary brokers and agents may not even understand the significance of the questions much less why they might be an indicator of ordinariness.  So, here is the background for each question (If you haven’t read the original post, it would make sense to do so before continuing):

1.  Do you charge home sellers a percentage based commission? I’m sure you’re doing it because you’ve never questioned whether it made any sense or not. I assure you it does not.  If you need convincing, start HERE.

There is no relation between the time, money and effort it takes to sell a home and a percentage of the sale price as sales commission.  It’s a complete disconnect that nobody in the industry can explain logically. Rather than pound away at it again, if you need to learn why that approach is so off-track, just follow the link (‘HERE’) above.

2.  Do your sellers pay the full percentage based commission specified in the listing agreement even if there is no outside selling broker or agent to pay?

One of the organizing principals of the real estate business is that people need representation.  Buyers need a knowledgeable expert to look out for their interests in a transactions just as sellers do.  So the real estate sales commission – usually, but not always paid by the seller – is designed to be split between the broker representing the seller and the broker representing the buyer.  Since most brokers hire agents to represent them, those agents also have to be compensated.  So that big percentage based sales commission is actually designed to compensate four people:  the listing broker, listing agent, selling broker and selling agent.  Fine.  Let’s do an example:  

Mary has a $350,000 house and lists it with Acme Realty,* agreeing to pay a 6%* sales commission when it sells.  That’s $18,000!  For simplicity’s sake, let’s assume that all splitting of commissions in this example will be done on a 50/50 basis:  the two offices will split the commission 50/50 and they each will split their portion 50/50 with their respective agents . . . which is rather laughable, because it happens so rarely today.  In today’s real estate universe, most agents are getting 65% -70% of their office’s portion of the commission, sometimes even more.  But back to the example.  We break down Mary’s $18,000 commission as follows:

$4,500 for the Listing Office

$4,500 for the Listing Agent

$4,500 for the Selling Office

$4,500 for the Selling Agent

Now, what happens if the Listing Agent finds the buyer?  We’re not having to pay a Selling Office or Selling Agent, right?  Does Mary get to keep the $9,000 that was designated for them?  

Ok, ok, I know:  the Listing Agent is doing two jobs here, that of the Listing Agent and that of the Selling Agent, so they should get paid twice, right?  And what about the Listing Office?  They had marketing expenses on the Listing Side and have to pay for all kinds of systems to enable agents in the office to find and work with buyers, so they should be compensated twice, too, right?  I won’t split that hair. Having been in the Ordinary business for years I will admit that there is a little more effort for a listing agent who finds his or her own buyer and a little more strain on office resources . . . . but it’s a little more, not $9,000 more.  The in-house sale is a windfall for agents and brokers at the expense of home sellers, so much so that in the biz we call it ‘Double-Dipping.’  

3.  Do you allow your sellers to actively seek their own buyer if they choose?  And if they are successful, do they pay less?

We are connected people.  You have friends, family, neighbors, co-workers, acquaintances.   And there is a chance that any one of those people – or someone they know – may be the best buyer for your house.   But when you list with Acme, are you encouraged to spread the word to your personal network?  And if you do and are successful in finding your own buyer – not only eliminating the Selling Broker and Selling Agent, but also eliminating the marketing function from Listing Brokers list of duties –  is there a corresponding reduction in the sales commission you pay?  Wouldn’t it make sense if there was?  I’m just sayin’ . . . 

4.  Does your office management team spend the bulk of its time recruiting new agents and training unsuccessful agents?

This is symptomatic of a real estate office and broker with the accent on the wrong syllable.  They are in the recruiting business, not the real estate business.   This is a broker who believes hiring agents is the key to profitability . . . and almost any agent will do.

Listen:  most people who get a real estate license and join an office don’t make it.  Most are gone in a couple of years.  But everyone who gets a license has friends, family and neighbors who might do business with them before they crash and burn and leave the business.  The Ordinary broker builds his or her business on this principal, using the personal relationships of recruited agents to expand the office’s reach to consumers.  

The extraordinary broker, on the other hand, uses carefully orchestrated marketing and finely tuned office systems to expand his or her business and enhance profitability.  Agents are very important, but they are there to help the broker take care of the business the broker has created, not to create business for the broker (although, that naturally happens).  

Can you see the difference?  The Ordinary broker, running a body shop, really doesn’t care whether the new recruit becomes an outstanding agent or not.  Oh, they’d like everyone to be successful and make them a ton of money, but they know that’s not going to happen.  What’s really important is that they get 5 or 6 deals out of those failing recruits before they move on.  

On the other hand, the extraordinary broker’s business lives and dies based on how well his agents take care of the buyers and sellers the he has worked so hard to secure.  There is no room for non-producers, for those who lose leads and fumble repeatedly.  Bumping along at 6 deals a year is unacceptable. 

5.  Does your office incentivize agents to help in recruiting?

All this means is that the number one priority in the office is to add more agents.  See the explanation in #2 above – it is the same. 

6.  Are agents in your office responsible for doing their own marketing and generating their own leads?

In the ’70s and ’80s, when brokers took the accent off marketing and lead generation and put it on recruiting they found the only real tool they had to attract agents was commission split.  This made sense then as it does now:  when everyone has the same operating system and the same tools, all that’s left to distinguish one company from another is commission split and personality.  From that time forward, agent commission splits have risen and risen to ridiculous levels.  Even non-productive agents are often paid stratospheric splits.  With more of each commission dollar going to the agents, brokers had less to spend on marketing.  Most simply quit marketing homes – that became the responsibility of the agents.  Instead, many brokers shifted their own marketing efforts to recruiting and retention programs.  They were marketing to attract new agents and to cause the ones they already had to stick around.

The reason this question is on the list is that the situation is symptomatic of an office that’s gotten out of the real estate business and into the recruiting business.

7.  Are  the mediocre agents in your office – ones doing, say, 8 deals a year or fewer – on  commission splits greater than 50%?

According to NAR, the average REALTOR in 2012 grossed $34,900.  That’s a little less than $17 an hour before taxes, insurance, business expenses and so on (assuming a 40 hour work week).  That will most likely be less than 10 closed transaction sides . . . and will often result in the agent getting some kind of plaque.  In fact, ‘Million Dollar Club’ agents – those who sell $1Million worth of real estate will gross something less than $20,000.  This is not only acceptable to most ordinary brokers, it is often celebrated, rewarded, fussed over.  If the non-producers in your office are being paid more than 50% all it says is that your broker is begging people to come to work for the company, even non-productive people.

Here’s a great truth from nature:  eagles don’t flock with turkeys.  If you are not one of  the living dead occupying space in your Ordinary office, get out!  Now!  And then do something extraordinary:  take a look at becoming a Help-U-Sell set fee broker or a buyer’s agent in a Help-U-Sell office.  

8.  Have you changed offices in the last 2 years?

Many years ago, I spent some time as Director of Recruiting at Century 21’s International Headquarters  (Can you imagine that?? Me???!  That was before I saw the light!).  We tracked all kinds of things related to agents and offices.  One of those things was turnover.  Generally speaking, every office turned completely over every three years.  I know:  the visual of that office turning over is funny.  But the stat isn’t.  It means if you take a photo of your office staff during sales meeting today, and put it away for three years and then look at it . . . .most of the people in the picture will no long be with the office.  Yes there are exceptions, but the fact is, agents in general have become obsessed with commission split, and office jumping to attain a higher number is regular as rain.  And what does this behavior say about the function of the office and the broker?  It says those things are irrelevant.  Unimportant.  A necessary evil.  If you are caught in this office-jumping cycle, consider the notion that a capable broker can greatly enhance your career.  If the broker’s business is to generate leads that you convert to sales, you’ll do more, make more and have more fun.  Of course, your split will be lower, because your broker will be spending serious money on marketing, but your career will be so much better you’ll finally stay put!  

9.  Do you put all of your listings in the MLS?

The MLS is great!  It’s a wonderful marketing tool!  Trouble is:  it’s expensive.  A seller going into the MLS has to be prepared to compensate not just the listing office and agent, but also the outside office and agent representing the buyer.  In many situations it’s worth the expense, but not in all situations.  

In fact, in most normal markets (not depressed or under-performing) , a properly priced listing will sell in a reasonable time with or without the MLS.  So why add the additional expense to the seller’s HUD-1 if you don’t have to?  If you could get the job done without costly outside help and thus save the seller serious money, why wouldn’t you?  I know:  your MLS probably has a rule that says you have to put all listings in, but that just means your seller has to sign a waiver if they’re not going into the MLS.  

Of course, if you hold your best, most marketable listings out of the MLS, passing the savings on to your sellers, your fellow agents are going to hate you.  You will be taking a little of their cheese away and giving it to your sellers.  But who are you supposed to be taking care of in your real estate career?  Your listed seller or the agent who works in the office down the street who secretly wishes you’d move to Tierra Del Fuego?

10.  Does your office own or have an interest in ancillary services (termite, title, escrow, mortgage, etc), and does your management team pressure you to pressure your clients to use those services?

I remember working with Ordinary brokers in the ’90s.  The big issue – other than recruiting, of course – was profitability.  You see, there was none.  By then, agents were demanding such high splits that even good, productive offices were making no money.  I remember going to a meeting of brokers in California.  Their discussion of profit was honest.  The consensus was that it was impossible to make a real profit in real estate, that the smart thing to do was to use the real estate office to drive business to your ancillary services.  Make your money on title, escrow, insurance, and so on.  Sad.

Really:  don’t you think that, if your business can’t make a real profit that maybe there’s a problem with your business model?  I mean, if you were selling hammers that cost you $2.00 for $3.00 and paying the salesperson 50% commission, you’d know what to do.  Why is that so hard in real estate?  

Are You Ordinary?

Well, the nasty-gramms have already started to roll in. If you are Help-U-Sell you know this comes with the territory: we scare the be-jabbers out of ordinary REALTORS so they tend to hurl Molotovs when we make ourselves heard.

My last post – the one about building a landing page for Sellers – contained some blunt but honest words about ordinary REALTORS. I named a handful of national brands, lumped them all together and said they were ordinary and that there was not one whit of difference in their consumer-side operating systems. There may be some behind the scenes areas of differentiation, most frequently in the way agents are paid and how they are encouraged to help the broker recruit, but the consumer doesn’t see that and doesn’t care about it. The consumer experience is identical whether you are Keller-Williams, Coldwell Banker or Exit. And trust me: that is not a good thing.

So I had a couple of people tell me I don’t know what I’m talking about because their brand is anything but ordinary! I had an old friend from my Century 21 days tell me I’d probably never work in the legitimate real estate business again. Now that’s a hoot, isn’t it? Because in that pronouncement he labelled the Brand I love, which is the one viable alternative to the tired agent-oriented real estate business model (Help-U-Sell), ‘Illegitimate.’ I think I’d rather be illegitimate than extinct, wouldn’t you?

I think it’s time you put your own real estate career to the test. All of you. It’s a simple set of 10 yes/no questions. If you answer ‘yes’ to more than 3 of them, then, no doubt about it, you are ORDINARY – and therefore headed for extinction sometime in the next decade. Ready? Let’s Go!

  1. Do you charge home sellers a percentage based commission? I’m sure you’re doing it because you’ve never questioned whether it made any sense or not. I assure you it does not.  If you need convincing, start HERE.
  2. Do your sellers pay the full percentage based commission specified in the listing agreement even if there is no outside selling broker or agent to pay?
  3. Do you allow your sellers to actively seek their own buyers if they choose?  And if they are successful, do they pay less?
  4. Does your office management team spend the bulk of its time recruiting new agents and training unsuccessful agents?
  5. Does your office incentivize agents to help in recruiting?
  6. Are agents in your office responsible for doing their own marketing and generating their own leads?
  7. Are  the mediocre agents in your office – ones doing, say, 8 deals a year or fewer – on  commission splits greater than 50%?
  8. Have you changed offices in the last 2 years?
  9. Do you put all of your listings in the MLS?
  10. Does your office own or have an interest in ancillary services (termite, title, escrow, mortgage, etc), and does your management team pressure you to pressure your clients to use those services?

Seriously:  3 yeses and your REALTOR DNA is probably so twisted you may never recover.  The only hope would be if Don Taylor – the founder of Help-U-Sell – were to open up a Betty Ford type clinic for recovering 6%ers . . . and I’m sorry, but he has his eye on other prizes.

So, what do you do if you do get more than 3 yeses and have to admit that you are, in fact, ordinary?  Here’s an idea:

  1. Take your gross income from last year.  Go ahead, take it right off the 1099
  2. Divide that by 52.  It’s ok to use a calculator for this and subsequent steps
  3. Now estimate how many hours you put into your real estate career in a typical week
  4. Divide the Dollars (the answer you got when you did the division in step 2) by the hours (step 3)
  5. That’s how much you made per hour last year in real estate . . . Gross, before taxes, insurance, business expenses, and so on
  6. Now compare that with minimum wage, or with starting pay in any salaried job for which you might qualify
  7. There’s no easy way to say this . . .  if the hourly wage is higher than what you grossed per hour last year, get out of the real estate business

Finally, I also got taken to task for ‘hating real estate agents.’  I’m sorry:  that’s just WRONG.  I love good real estate agents.  I think they are more than essential.  I think they are heroes.  What I can’t stand are mediocre real estate agents who continue to bump along, almost failing year after year.  They deliver inferior service, drag the image of the entire industry down, and sap business from good agents who could serve those buyers and sellers so much better.

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