The Price is Right - Breaking Down Commission for a Real Estate Professional.
By Kathy Baker / May 20, 2022
The evolution of the real estate business over the past few decades has it moving from a local to a global industry. As we know, initially, all information and data were wholly controlled and owned by the Real Estate Broker. Upon the birth and integration of the internet and everything becoming accessible to the consumer, the game changed, significantly. As the consumer obtained more control, we were told by many subject matter experts that the role of the REALTOR® would be completely replaced by the internet…there would be no need for the services of real estate professionals.
Ironically, the speed and vast availability of information available for the consumer created an even greater demand for the professional services the REALTOR® offers. Over the past two decades, research has proven this; the more data the consumer is provided, the greater the demand for the wisdom and navigation expertise of a knowledgeable REALTOR®.
Once experiencing representation by a truly dedicated professional, the savvy consumer is more than ready, willing, and able to compensate the agent! The challenge? Not everyone understands how the Realtor is paid. Let’s take a few moments to explore how much real estate agents really make.
The Entrepreneurial Spirit
First things first; embrace the bravery and courage of the independent contractor. REALTORS (in almost all situations) are independent contractors. One step further, no salary, no benefits, no 401K. All earnings are solely based on their ability to win the business of the buyer and/or seller. For successful, proven professionals, this is accomplished through building their business in partnership with the right Broker, brand, and their willingness to hustle. There is no free ticket to success in the real estate industry.
What affects the Commission?
Shifting dynamics within each market combined with additional variables, such as interest rates, availability of inventory and other uncontrollable conditions generate demands on commissions. What we often experience is that the more chaos and
uncertainty in the market, the greater the value of the commissions paid and earned. What the consumer does not realize is that often a great market (such as the one we have currently enjoyed) demands a more experienced professional, not a cheaper commission. Just as a passenger needs an experienced pilot when flying in stormy and uncertain weather, extreme highs, lows, and uncertainty in market conditions, creates more need for experienced navigation in the real estate transaction.
How Commissions are set and established
Commissions are established by the local market, and often influenced by conditions as previously stated. During these varying market conditions, REALTORS often find themselves victims of the “commissionectomy” by the consumer. The consumers may demand to pay a lower rate, even when the risk is greater than ever.
The Value of a Professional
Our intention is that all professionals recognize their value and guard their commissions. We encourage providing value while ensuring the best interest of the consumer in providing those goals are secured and protected. Most importantly that the REALTOR is secure and protected with compensation.
Think of it from this perspective: Why would you consider hiring a professional who cannot protect his own compensation? How could you possibly trust their negotiation skills?
If the REALTOR can be out negotiated by the consumer on his or her commission, how can they possibly protect the integrity of the transaction?
Simply stated, the commission is split when there is representation on each side of the transaction. Most markets command that the commission is equally split between the representing brokerages…. not agents. Of that “split” the Brokerage and brand are paid first, after their share is taken; the agent is next. With traditional brokerages, this may be from 50 to 90%...
Currently, there is a huge disruption in the industry. Many professionals are truly realizing their worth and moving to an industry disruptor. ONE that acknowledges their professional, undisputed value with a transaction fee. We are proud to be the fastest growing disruptor in the industry. Realty ONE Group is offering a great alternative to provide a truly fair share for tomorrow’s leaders, today.
Your Expertise and Specialty will Affect Your Compensation
Increase your value by increasing your knowledge and expertise. In today’s demanding times, in addition to being a residential specialist, there are multiple designations and areas of specialty that today’s professionals can focus on. Let’s look at how an investment in your future may amplify the value and significance of a REALTOR®.
- New Homes Construction
The more you learn, the more you earn, literally. When you increase your knowledge, you increase your value to the consumer, and you increase your opportunity to earn at a higher level.
The Evolution Continues
As the industry continues to evolve, all things will change. Dynamics will change, technology will change, brokerages will change. Yet, the desire by the consumer for a consummate navigator to take them safely through the transaction will not change. What must strive to provide value in the transaction. To transport the buyer and seller from contract to close with ease and elegance vs. blood and guts.
To shift the evolution to a revolution, commit to growth and development. Commit to be a learner, not a knower. Provide value and learn to articulate that value with each opportunity you earn.
Keep in mind, it’s the small things that will set you apart from your competition. Pay close attention to the details, listen to understand, not respond and always, be a resource, not a sales pitch!
Learn more about Realty ONE Group’s unique commission model!