Insider Secrets: Professional Selling

and what the Brokers won't tell you

Many people make the mistaken assumption that, because homes are bought on emotion, they are not "sold" to buyers so much as shown to buyers. Indeed, this is what happens with most homes for sale by owners and, unfortunately, it also happens with many Real Estate Agents, too.

However, after reading about Touch Points, you begin to understand a true Sales Professional can have a tremendous impact on the emotions felt by a buyer when viewing a home.

Unfortunately, we've probably all heard horror stories about Real Estate Agents taking listings and then doing little more than putting the home on a Multiple Listing Service in order to try and sell it.

One of the secrets most Brokers won't tell you is that they typically don't care what skills their Agents have in selling. A Broker looks at an Agent as a potential source of leads; since the Broker invests very little time in developing the skills of an Agent, many Brokers are willing to start as many Agents as possible on the basis that they have lost little if they don't bring any sales in. Brokers do not pay Agents unless they sell a home, so an Agent that is not bringing in sales is not likely to stick around for long.

Unfortunately for many sellers, (and fortunately for many less skilled Agents), people frequently use an Agent they know to sell their home, regardless of their skills in selling. The less skilled among this group tend to be the "Listers"; the Agents that know how to list a home and place an Ad' for it, but little else.

Where do the fees go?

Real Estate Agent's fees vary from country to country and even region within a country. UK Agents might earn 2% on each sale, Australia 4% and the USA 6%. Regional variations mean that there is no "standard rate", especially in the USA.

In the USA, some Brokers are beginning to charge a fixed fee for specific services, allowing home owners to select from a menu of services. Sometimes these Brokers ask for a portion of these fees to be paid upfront, before a sale is made.

With Brokers that charge a fee based upon a percentage of the price the home is eventually sold for, the range of services provided varies enormously. Even within the same Brokerage, some Agents are more thorough than others, providing a wider range of service to their clients. The quality of service you receive as a seller is largely dependent upon the sales experience of the Agent and not the Brokerage. This makes it very difficult for Sellers to differentiate between Agents based solely on the percentage they charge for their services or the Brokerage they work for.

An Agent charging 6% will not automatically provide a better service than one charging 5%, but they may. To fully understand this, it will help to have a quick lesson in where the fees go.

In the USA, most licensed salespeople are independent Agents, not actually employed by the Broker. The Agent gets paid only when they sell a home either for their own Broker, or for another Broker as a sub-agent.

One of the benefits of using a Professional Salesperson to sell your home is their ability to attract buyers that are already working with other Agents in your area. Your Salesperson can do this by offering to pay other Agents a percentage of the commissions you have agreed to pay your Agent's Broker. This is often known as the "co-broke fee".

MYTH #2: Agents get paid whatever you agree as a percentage when you list a home with their firm.

Reality: The Agent gets a fraction of the amount you agree to pay the Brokerage, depending upon their Agency agreement. For example, if you agree to pay the Agent 6% on the sale of your home, the 6% is divided like a pie between the Listing Broker and the Selling Broker. The listing Agent (sometimes the Listing Broker) determines what percentage the Selling Broker will receive. Lets assume the split is 50/50, so the Listing Broker will get 50% of the 6% (or 3%) and the Selling Broker will get the same.

Each Broker determines how much their Agents receive based upon their Agency agreement. At some Brokers, the Agent may get as little as 30% of the Broker's commissions, at others, they may get 100%.

In this scenario, if the Listing Broker pays their Agents 40% of commissions earned and the Selling Broker pays 50%, the Listing Agent would receive 1.2% of the sale and the Selling Agent would receive 1.5%.

This is illustrated below based upon a $100,000 sale with a total fee being agreed at 6%.

In companies where the Agents are paid a higher percentage, the Agent will typically have to deduct their marketing expenses (e.g. advertising, direct mail, printing, gas, payroll for assistants, etc) from their share of the fees, with the remainder being taken as income (and being taxable).

Because of the way the fees get split, many Agents (and Brokers) try to both list a home and sell it themselves, allowing them to receive both halves of the commission income. Unfortunately, this does not always get the best deal for the sellers. The best Agents for sellers are those that actively try to sell your home by working with other Agents; that is how they attract the most buyers.

Why a lower percentage is not always better for the Seller
There is an interesting side-effect of the splits on commissions: by negotiating a lower commission, you are lowering the amount the broker is able to pay a sub-agent (selling Agent) for selling your home to their buyers. The lower the sub-agent fee, the less incentive their is for Agents to sell your home to their buyers, especially compared to other homes with higher percentages where they can earn more money. Conversely, offering to pay a higher fee provided it is split with sub-agents will give a greater incentive to all Agents to sell your home.

MYTH #3:An Agent with a lot  of listings must be good at selling homes.

Reality: This Agent is good at selling their services to a home owner. A good Listing Agent might never actually Sell a home; instead, they rely upon other sub-agents to do their selling for them.

MYTH #4:Agents with years of experience are always better than new Agents.

Reality: Agents with years of experience often get lazy because they don't need to work very hard to get listings. Many of their listings are received by referrals from past customers, friends and family. A new Agent with Professional Sales Training from outside the Real Estate field might be able to outsell a twenty-year veteran of the Real Estate field because they have skills and techniques that other Agents lack.

Don't discount a new Agent without first asking how successful they were before they got into Real Estate and why they became a Realtor. (New Agents are often willing to work much harder for you because they need your business more).