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
621,135
David Popoff
DMK Real Estate - Darien, CT
RealtorĀ®,SRS, Green ~ Fairfield County, Ct

Some really good points, it is a lot of work being in the real estate business.... here is another great ActiveRain post on the costs of being a Real Estate Agent.

http://activerain.com/blogsview/2514066/how-much-does-it-cost-to-become-a-real-estate-agent-

 

Jul 26, 2012 11:49 AM #1
Rainmaker
681,661
Evelyn Kennedy
Gallagher & Lindsey, Alameda, California - Alameda, CA
Alameda, Real Estate, Alameda, CA

Li:

Good information for consumers which might help them understand how we do business and what commission really means.

Jul 26, 2012 11:50 AM #2
Rainmaker
220,223
Barbara Flannery
USA Realty,Inc. - London, KY
"Homes for Everyone In London Kentucky"

Great Post, some good information, Thanks for sharing!!

Barbara

Jul 26, 2012 12:39 PM #3
Rainmaker
552,296
Diane Daley
Caron's Gateway Real Estate - Northumberland, NH

Each is different but I try to be agent heavy on the funds as they do the work with a step program that they gain more with the more sales they close.

Jul 26, 2012 01:44 PM #4
Rainmaker
1,022,626
Adrian Willanger
206 909-7536 TheHomeFunnel.com - Seattle, WA
Profit from my two decades of experience

Li-I think I've done everything you mentioned at some point of my career? I like the technology tools that are available that help make my work a lot more enjoyable and easier. But there's something special about practicing real estate that  lights me up!

 

Best-Adrian

Jul 26, 2012 01:46 PM #5
Rainmaker
1,144,484
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

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

Jul 27, 2012 11:59 AM #6
Rainmaker
1,144,484
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

Hi, Evelyn...appreciated your comment!

Jul 27, 2012 11:59 AM #7
Rainmaker
1,144,484
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

Thank you, Barbara...appreciated hearing from you.

Jul 27, 2012 12:00 PM #8
Rainmaker
1,144,484
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

Good point, Caron's Gateway!

Jul 27, 2012 12:01 PM #9
Rainmaker
1,144,484
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

Adrian, you and I think alike...I love what I do, too.

Jul 27, 2012 12:01 PM #10
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Rainmaker
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Li Read

Caring expertise...knowledge for you!
Call me for Salt Spring Island real estate!
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