February 23, 2014
Why do 90% of real estate sales agents earn sub standard incomes of less than $70,000 per year?
Is the reason 90% of the top 10% of agents leave the industry because of the long hours required to earn this income?
Why is it that 90% of the public don’t like or trust agents?
Do you think Franchises and Principals are happy overall with the current real estate sales model and commission split arrangement?
My guess is that 90% of franchise groups are happy and many real estate principals are happy with their profits, time investment and the wealth they are building.
So with such enormous dissatisfaction levels from consumers and sales agents how long will it take before our real estate industry improves the experience for these two essential groups that make our industry possible?
It’s my belief that 90% of consumers are dissatisfied because of their experiences with real estate sales agents. Many consumers feel let down from the expectations given to them by agents from both buying and selling view points. But I don’t believe it’s the sales agents fault!
Sales agents are overworked and underpaid. Many real estate sales agents get into real estate with good intentions to help people. Sure they want to earn a good income also, who doesn’t? But the average agent is working 59.76 hours per week and earning less than $70,000 per year (the actual official average is about $46,000 pa.).
What would happen if sales agents were only required to work a normal 40 hour week to consistently produce 3-4 sales per month?
What if sales agents were earning 70-80% of the gross commissions instead of the measly 30-50% currently being paid? After all it’s the sales agents that are doing 70-80% of the most difficult components (skills and effort) of the sales process while the principals and franchise groups do a mere 20-30% of the easiest aspects required.
If the sales agents were earning 70-80% of the commission on 3-4 sales per month with an average gross fee of about $14,000, the sales agent would be earning around $300,000-$400,000 per year (this is what your group certificate should show).
When a bigger percentage of sales agents are earning higher incomes and working less hours, it’s my belief that they would be under far less pressure. That’s obvious right?
Sales agents would be more relaxed when communicating with consumers and far less likely to give consumers false expectations to win listings or get properties sold because they would not be so desperate.
In my opinion it’s these false expectations that leave 90% of consumers with hardened hearts and bitter sour tastes in their mouths when it comes to dealing with estate agents and our beloved real estate industry.
Why not just be upfront and honest with sellers before you sign them up and maintain this honesty with buyers when promoting properties?
Let’s face it, if you have to make a vendor see the realistic value 3 weeks after you signed them up, you have given them false expectations by not informing them of realistic probable value prior to signing with you. This is manipulation, it’s not skill or persuasion. It’s not hard to lie to or mislead good decent people in order to get them to do something for you, especially when you are complimenting them and their property. Many agents will say they gave the accurate price on the paperwork but they know full well they have been taught to operate within the laws and win business while giving inflated verbal price expectations.
I do not believe that sales agents are responsible for what they are learning because majority of new comers do not have the money required to pay for proper training. Most new sales agents take what ever training is provided to them by their principal or franchise group. Most sales agents enter the industry with no experience, ready to learn and absorb as much as they can to succeed?
In many cases sales agents are taught these “tricky” methods by franchise groups and trainers that are endorsed by the principals. Why would such methods be endorsed by franchise groups or principals? Because these groups benefit most from more sales. In my opinion it’s because they want their sales agents to be taught the strategies that will allow the biggest percentage of agents to be able to make the most sales, regardless of the consumers experience.
The main problem here is that it’s not just 90% of consumers having bad experiences, it’s also 90% of sales agents feeling uneasy about these practices (at least to begin with), although it’s the only way many know how to work in order to survive, pay their living expenses and feed themselves.
The good news is that it doesn’t have to be this way. There are still principals and trainers teaching agents methods that help sales agents win listings and make sales while leaving majority of the consumers and also the sales people with a great experience.
When consumers and sales agents have good experiences, do you think the principals also get a good profit experience? Of course they do. It just takes a little extra effort to train the sales agents to win business through honest communication and with honest expectations.
In my humble opinion our real estate industry will begin to make real inroads into consumer and sales agent satisfaction levels when the sales agents are given more time-saving support (from the franchises and principals who take such a huge cut of the commissions), and when even average sales people are rewarded with a 60-80% split of the commissions.
I know that franchise groups and many principals are not going to like or agree with this because it means they would lose profits or have to work harder to find and train more sales people to maintain their profit levels but if this is what it will take for our industry to give the public and sales agents a better experience, should we think about, discuss and act upon this?
The principals and franchises who begin making these adjustments will not only survive any upcoming difficult periods but they will surely
thrive by attracting more quality sales people to their organizations and in turn help more consumers, leading to even more sales, higher client satisfaction, higher agent satisfaction (less burnout) and higher profits.
Here’s what real estate sales people should expect from their principal, franchise or groups:
1. A bigger percentage of the commission especially when they find their own listings.
2. More support (tasks that don’t lead directly to a dollar productive result) that reduces the sales agents workload giving the sales agent more time to choose between more listings & sales results or more free personal time.
Franchise groups and principals are not providing sufficient business models or support platforms to be able to pay sales people higher percentages of the commission or remove a bigger percentage of the frustrating day to day trivial tasks that don’t directly contribute to a listing or a sale.
What sort of things?
Before I get into that, let’s agree that between the franchise and the principal, they are taking away 50-70% of the gross commissions the hard working sales agents are bringing in?
OK, now what exactly does a sales agent get in return for this massive tax on their hard earned money?
- A brand or name
- A desk
- A receptionist
- Admin support to load listings, make changes etc.
- A trust account to hold buyer deposits
- An administrator to do settlements on your behalf
- Listing enquiries (are you really getting many from the office?)
- A contact management system that only works if you are sitting at the computer in your office
Plus the essential services such as:
Is there anything else you can think of? If so make a comment at the bottom of this article to let me know.
Now let’s take a look at how much it would cost you to engage your own suppliers to provide these services for you.
Before we list the actual costs, can I ask you a quick question?
I’ll assume you said yes because I cannot possibly hear your response.
Do you think many people list with you (the sales agent) because of your company, your profile, your franchise group or your principal or do you think that majority of people who list and sell with you, like and trust YOU?
Once upon a time when people trusted big companies, they had great value but today loyalty comes down to the person who is sitting in front of the sellers today, not the biggest company.
Your company, your profile and your franchise group may provide some small benefits to you listing vendors but ultimately if the property seller doesn’t like and trust you, will they list and sell with you or your company/ franchise?
Let’s get back to investigating how much it would cost you to arrange your own suppliers to get your listings successfully sold:
Comments and Expenses
|A Brand or Name||Well we just agreed that this isn’t as important as perhaps it once was, years ago. I know we are made to feel like it is but I can assure you it’s not because when I used to call prospects they would often say “where are you from, I’ve never heard of your company”. And I still earned over $411,000 in my first year.|
|A Desk and Office||You can lease your own office for between $550 to $1,300 per month depending on your location.|
|A Receptionist||Depending on how many calls you have answered by a receptionist these days instead if your mobile, you can hire a professional Australian receptionist for $50-$90 per month.|
|Admin support to load listings, make changes etc.
||You can hire an assistant to do this for $100-$200 per listing.|
|A trust account to hold buyer deposits||Not much|
|An administrator to do settlements on your behalf||Approximately $100 per settlement|
|Listing enquiries (are you really getting many from the office?)||You can generate more listing enquiry in one month than most offices provide in 3-4 months with your own lead generation system.
The investment is less than $3,000 to set up and under $400 a month to run plus what ever level of marketing you want.
|A contact management system||You can get access to a contact management system for just $200-$400 per month|
|RP-Data||Approx. $270 per month|
||Approx. $270 per month|
|Domain.com.au||Approx. $400 per month|
||Approx. $500 per month|
|Approx. $3,900 per month|
You would be looking at fairly low start up expenses under $10,000-$20,000 and monthly expenses of about $3,900.
At first glance, this might seem like a lot but let’s assume you are currently doing just 3 sales per month.
Now if your average gross commission per sale is $14,000 this means you are producing $42,000 in gross commissions per month.
If you are being taxed 60% by your franchise and principal (10% GST, 10% to franchise, 10% marketing Levy, 40% Principal/Office Fee, 30% Sales Agent), this means you are currently giving away $25,200 per month as opposed to $3,900 per month doing it on your own.
The difference to you is $21,300 per month or $255,600 per year that you would get as opposed to giving to your principal and franchise group.
There are new real estate models (Models that completely change the playing field of real estate sales) and support platforms being provided where you can get all the services you currently get plus also get features and benefits like you have never heard of before. Better still, you will be able to get access to this sort of support for a small flat fee.
I am not talking about REMAX type models, work from home models nor One Agency type models that really don’t do much for you at all except give you a name, website, realestate.com.au and domain.com.au access and a few basic sales data services.
I am talking about benefits that help you win more listings to bank more money and remove more of the day to day grunt work that simply doesn’t directly lead to dollar productive results.
- Buyer email enquiries from domain.com.au and realestate.com.au entered into YOUR contact management system for you.
- Buyer email enquiries from domain.com.au and realestate.com.au answered for you on your behalf so your buyers (also hidden sellers) have amazing service experiences from you.
(most agents don’t even bother returning these email enquiries let alone entering the data into their contact management system. Imagine how many extra listing opportunities would come your way from this sort of service?).
Now I know what you are thinking. These enquiries rarely have an accurate phone number and the questions asked are usually answered on the property advert anyway, right? How many of these leads do you think could be prospective sellers?
- Well how would you benefit if your franchise or principal also followed up with these emails to discover their phone numbers and email you with all the contact details and also inform you which ones may be the potential sellers?
Please don’t make the mistake of closing your mind at this point just because you have never heard of these benefits being offered before.
We still have more benefits available from these new real estate offices.
- How would you like all your contacts managed on your behalf? So they get followed up regardless of what you are doing and reminders get sent to your mobile phone (from the cloud) when your hottest contacts may need a personal call.
- How much easier would it be for you to receive an email notification when contacts you thought were cold suddenly turn hot? This means less guess work and more productive actions that improve your ratios.
We are not finished with the benefits yet.
- Your own lead generation system that can produce 30-40 seller contacts every single month with no personal effort prospecting.
- When you get your listings signed, you just send through the listing agreement, and associated paperwork to admin and they coordinate your marketing team for you, so all you need to do is get the approval from your clients a few days later.
- A listing presentation on iPad that clearly demonstrates unique benefits you can offer (and your competitors can’t).
This is perhaps the best benefit of the new residential sales platforms becoming available.
- Sales agents get 100% of the commission less a small flat fee for access to the services mentioned above and much more.
Basically you will likely find yourself earning 2-3 times your current sales income working fewer hours and now enjoying real lifestyle balance, unless you just want to earn a bigger income. At least you will finally have freedom of choice.
How excited are you?
I know, I know. You have heard all sorts of promises and hype over the years. You have probably been in real estate for years and think you’ve seen and heard it all. But what if everything I just revealed to you was true, how excited would you be about work again?
Two to three times the commission splits and less frustrating admin work that doesn’t lead directly to dollar productive results.
This means. You will get more listings, make more sales and earn more money, plus due to the extra time you have freed up you can enjoy more free time with yourself, your family and friends etc. Or you can work more and bank more commissions.
The point is you have a real choice. How are your choices at the moment?
If you would like to find out more about these unique real estate sales platforms and new business models that will help you double or triple your sales income starting today simply click here.
You are really going to love this!