The latest issue of ‘The Economist’ has an interesting article about the value of real estate professionals. The piece questions why estate agents in Brittain charge 2%-3% of the sales price as commission and typically do 40 – 50 deals a year while American agents charge double that and average 7 transactions a year. Here, please read it for yourself.
It does make you wonder.
And there is some pretty good speculation on the part of the author, too . . . ok: maybe (s)he gets a little carried away near the end of the piece but I think for the most part the points are well made.
Here’s what I remember:
I was running a Century 21 office in Georgia in the early 80’s with an average sale price at about $100,000. Commission splits to agents were reasonable: in the 60%-65% range for solid producers. The Franchisor announced their new premiere award, the Centurion. At that time, an agent needed to generate $150,000 in Gross Commission Income to the office or close 50 sides of business to win. Because our price range was lower and our commissions less, my agents found it hard to conceive of generating $150,000 in commissions. But they could imagine doing 50 deals a year . . . and they did.
I remember being on the Convention shuttle that year with my first award winning agent. We were comparing notes with another award winner from the San Francisco area. Each had won the same award, the Centurion. My agent was sharing that she’d done 55 closed sides and asked what the other agent did. The answer: 12.
It would be hard to tell which agent delivered the best service to her client, but I’ll tell you this: as a buyer or seller I’ll take the 50 deal a year person every day. That’s a person who fights and claws her way through a transaction, who learns how to make things work and brings all of that street smarts to the table. That’s a high value addition to the transaction, worth every penny whether Set Fee or Percentage Based.
While I do have a problem with high percentage based commissions, I think a bigger issue right now is poor productivity. How can we hold ourselves out as knowledgeable experts when all we’re doing is 5 or 6 or 7 deals a year?