Real estate models...everything works for someone, somewhere....

By
Real Estate Broker Owner with Sea to Sky Premier Properties (Salt Spring)


Sailing among the Gulf Islands


There are many different models of real estate out there, today.

Some are what I call conventional. In this case, the company manages and also controls the business presence of the company. It's a top down company management style.

In such a structure, the salespeople are on "splits", re commission.

It usually begins as a 50/50 "split"...50% to the company & 50% to the realtor. As commissions are made & a certain benchmark is achieved, the splits begin to shift...more to the realtor/less to the company.

Perhaps, if $50,000 worth of commissions comes in, then the split might become 60% to the realtor & 40% to the company. A commission benchmark of $100,000 might mean 70% to the realtor & 30% to the company. Incentives are built into this company model, then...80/20, and finally 90/10.

A top producer salesperson responds to this incentive program. Since the average income of a realtor is below $50,000, though, in this kind of business structure there will be many salespeople who remain at that 50/50 split level.

Such a company pays for many aspects of a realtor's life: a desk fee, mls fees, franchise fees if applicable, advertising under the company banner, signage, phone, business cards, etc. This is the reason for the initial 50% of commission earned going to the company. The demands on the realtor's purse are few, to begin with.

A completely opposite company structure is that of the 100% house...usually a franchise, where each office is individually owned and operated. In this model, the realtor in theory earns 100% of the commission. It doesn't actually work this way, though, as the realtor is also 100% responsible for all costs of doing business: franchise fee if applicable, desk fee, phone, business cards, signage, advertising, mls fees, insurance fees, etc. No one gets it all!

At the beginning of each year, one starts "fresh". There are good years and bad years in a sales career...markets dictate outcomes. In the 100% model, the costs are consistent but the income might not be. In market downturns, realtors might leave the supposed 100% offices and wait it out in a more conventional company structure, where the company has to pick up many of the costs associated with the real estate business.

A new aspect in the real estate industry is technology...with a smart phone & a tablet, a realtor can fully explore the mobility that has always been a part of this business. The very concept of a company, no matter its style, has completely changed.

The industry, the big box franchises, the mls have all been slow to recognize the true impact of technology...it delivered power to the consumer in all transactions, including real estate sales. The ability of the consumer to search all things erases the need to call a realtor for basic information. The past referral concept of franchises is likewise erased.

There are various options for sellers: 1% Realty offers a commission structure favouring their sellers. When a 1% realtor sells a listing with a conventional company, they insist on the full buyer's agent's half of the gross commission offered. Their 1% option is only for their sellers, then. No break for the consumer!

There is also a 2% Realty business out there, plus options to be "for sale by owner", or to be placed on mls for a flat fee/no further input from a realtor re extra marketing.

A more recent business model in the U.S. is the RedFin company. Its premise is that it returns half the gross commission to the buyer. Half is retained by the company, and the company's staff are paid employees, not commission salespeople. The company negotiates the transaction. Now there's a consumer driven model.

All that we can say about any business model, including real estate, is that we are all swimming in the Internet/technological shift moment...change is our mantra. The good thing? Anyone, anywhere, can create the new paradigm. And your thoughts are? Always welcome!

Oh, and by the way, my thought is: real estate needs a good interpreter. Yes, negotiation skills are also premier, but that interpretive function (both market trends and inventory) is an essential.

How may I help you to buy your special Salt Spring Island or Gulf Islands property? Look forward to meeting you!

liread33@gmail.com

 

 

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Rainmaker
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Li Read
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Sea to Sky Premier Properties (Salt Spring)

Thank you, David, for this link...appreciated!

July 27, 2012 11:59 AM
Rainmaker
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Li Read
Caring expertise...knowledge for you!
Sea to Sky Premier Properties (Salt Spring)

Hi, Evelyn...appreciated your comment!

July 27, 2012 11:59 AM
Rainmaker
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Li Read
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Thank you, Barbara...appreciated hearing from you.

July 27, 2012 12:00 PM
Rainmaker
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Li Read
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Good point, Caron's Gateway!

July 27, 2012 12:01 PM
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Adrian, you and I think alike...I love what I do, too.

July 27, 2012 12:01 PM
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real estate, b.c. real estate, salt spring island real estate, Canadian real estate, luxury real estate, waterfront specialist, private islands specialist, estate style properties, secondary home marketplace, active rain, Li at Sea to Sky Premier Properties, Mayne Island, Galiano Island, Pender Islands, Saturna Island, Salt Spring Island, southern Vancouver Island.