For those of you who feel this is probably just sour grapes, I would like to say that 2007 was my best year in real estate. I completed more transactions and made more money that I had in previous years.
And now you’re wondering: Is she going to tell us exactly how many transactions? I completed five transactions in the first eight months of the year. In this business, that’s good. Of course, I focused a lot on first time home buyers, so most of my commission checks were lower because the home’s sales price was lower.
How does that make sense? I typically spent more than a year working with about half of my clients. These are buyers, not sellers. The challenge is finding the right house for them at the right price. Yet my paycheck is substantially less than an agent working with a buyer who’s moving up. If you value a real estate agent’s time, then buyers who take longer should be paying more. Buyers who already own a home and have been through the purchase once, generally are much quicker about finding a home and completing the transaction. So those clients who complete the real estate transaction quickly, are actually subsidizing the real estate agent’s cost for clients who take more of the agent’s time. Is this fair? The real estate agent certainly has to feel that way.
Is the value of the job really based on the value of the home? Maybe if you’re listing a $3 million home, then your costs to advertise are higher. The timeframe involved is potentially longer, and the risks of being sued are also probably higher. In general, I don’t think so.
If you are listing a property, there is a certain amount of advertising expense that the agent has to spend. If the house sells in the first week, the costs to the agent are lower. If the house is still on the market in six months, then the agent has spent a lot more on promoting the sale of the home.
The real estate commission concept does not acknowledge the value of time. It is an arbitrary method of compensating the agent. And since the seller typically pays the commission, it wouldn’t be appropriate to charge the seller more for on agent than another. So what can an agent do to maximize her income? Only take on serious clients. Avoid first time buyers. Minimize the amount of time she spends with any client. On large sales listings, get the seller to contribute money toward the promotion of the property in addition to the agent’s commission.
And this is how agents serve their clients. Interesting, huh.
© 2007 by Judy Kane
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