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Justifying Your Commission: Show Clients What You’re Worth

Jay O'Brien

By Jay O’Brien

Do your clients view your commission as hard-earned income or a jackpot paycheck? I would be willing to bet the majority view a REALTOR®’s income as the latter. In fact, we constantly hear about the bribery and illegal kick backs awarded to those referring clients in the way of their friends or family. The idea of this should really raise the red flags. Are there actually consumers out there who feel comfortable earning a credit solely in exchange for doing business with a certain “professional”? Sounds more like a multi-level marketing philosophy than a legitimate sales technique. Why are so many real estate agents quick to offer their compensation to someone else? In simple terms, they need the cash.

Consider these staggering statistics:

  • 90 percent of agents complete no more than 3 transactions a year (Orange County MLS 2012)
  • 65 percent of agents sell zero homes a year (Orange County MLS 2012)
  • Only 1.8 percent of agents sell a minimum of one home per month (Orange County MLS 2012)
  • The median real estate income was approximately $39,140 last year (BLS.gov / May 2012)

Now consider this:

According to a 2013 MIT study, for a single adult, the least required annual income to survive in Orange County (before taxes) is $27,284. For a family of 4 to keep their heads above water—or above the poverty line—one must earn no less than $50,390 a year.

Assuming an average commission of 2.5 percent earned (excluding taxes and brokerage splits), this means only 11.6 percent of agents can afford to live off their income.

Enough with the jargon, here’s the real question:

If approximately 89 percent of real estate agents are competing for clients by offering discounts and rebates, how do you plan to demonstrate your value upfront in order to capture the missing business? In short, you’ll need to differentiate yourself from the competition. Use the following five points to illustrate your worth:

  1. Communicate the number of transactions you have successfully completed in the last 3 months.
  2. Provide testimonials from clients who have previously done business with you.
  3. Differentiate yourself from your competition; explain what it means to be an agent vs a REALTOR®.
  4. Give specifics about what you are going to do to help a client get into a house and/or sell one.
  5. Explain how your commission works; provide details about how you get paid and what you get paid for.

Does your client honestly believe the cheapest option is best when deciding who should handle one of the biggest transactions of his or her life?

Jay O’Brien is a REALTOR® with RE/MAX Prestige in Anaheim Hills, Calif. Aside from real estate, he regularly supports the Children’s Hospital of Orange County (CHOC) and is the co-founder of Mico York, a nonprofit organization that helps kids worldwide through their own personal artwork. Visit Jay on the web www.jayobrienrealestate.com or contact him at: Jay.obrien@remax.net.

Comments
  1. Mark B.

    Good Article Jay! Had no clue that’s the spread of statistics. Even though I haven’t purchased a home yet, I won’t be looking for any discounted agents.

  2. Great post – makes me want to check the stats on our agents in Tampa Bay – I know there are a lot fewer than most people think that sell real estate full-time!

  3. Great Post.. I want to also know the stats in Las Vegas market we had sales prices very low for a while, market started to pick up now.

  4. Jay

    Thanks for the feedback, everyone! I will be continuing to post on this site on a regular basis. I also just released this for another publication. Hopefully it’s of some help: http://marketingrealestate.biz/stop-look-and-listen-teach-your-clients-how-to-buy-a-home/#

  5. Great post. I’m 110% support you on this but i want to say it could be a different culture too. As many Asian agent offer buyers for kickback to earn the business, I feel sad for them but its very common in Asian community. Vegas price is low and our commission is small, I’m just glad I have a choice of who i want to take on and give my quality service to.

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