Success as a Real Estate Agent For Dummies. Zeller Dirk
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a successful career.
Every company says it offers good training. It’s your job to look under the hood to see for yourself. To do that, ask these three questions:
• What’s the loss ratio for new agents? The loss ratio is the number of agents who fail after completing the training program. This ratio tells you the effectiveness of the company’s new-agent training program. That is the true number of new-agent success.
• What is the per-person production ratio? The average production by the salespeople in the company tells you whom you’re likely to be surrounded by on a day-to-day basis. It clearly illustrates the results of the training programs. You’re looking for results. To have training for the sake of training or to claim you have training is worthless. The question is what results are achieved in terms of income and quality service to clients. A company that claims to have excellent training but has low agent performance is fooling itself and its agents.
• How do the agents segment into income brackets? The answer tells you whether the company’s ongoing training is building the capabilities of all agents or only a few. As an example of a breakdown you want to avoid, check out Table 2-1, which shows how agents in a 200-agent company segment into earning categories.
Online training is convenient because it can be accessed from your home office and can be synchronous or asynchronous. If you want to check out cutting-edge online training, visit my website at www.realestatechampions.com. We are truly the experts in this medium, having developed content for Coldwell Banker, Century 21, ERA Real Estate, Berkshire Hathaway Home Services, and many other national and international brands, as well as our own proprietary programs.
TABLE 2-1 Agent Segmentation by Income Bracket
Bending or breaking the rules
Real estate agents follow two basic sets of rules:
❯❯ The regulatory body that governs real estate in your state establishes one set of rules. This group sets regulations regarding how to handle the earnest money you collect from purchasers, what the deadlines are for the paperwork that is involved with each transaction, who is to receive original copies, and what timeline the legal aspects of the transaction are to follow. The regulatory group is generally focused on consumer protection.
❯❯ The second set of rules that most agents follow is the code of ethics established by the NAR. The code of ethics dictates how agents with NAR member companies should conduct business and how they should deal with prospects, clients, and other agents. Obtain a copy of the code of ethics from your broker, your local real estate board, or online at www.realtor.org.
However, individual agencies also have their own sets of rules. The following sections fill you in.
The rules of the house
Most company rules are based on the absolutes presented by state laws and regulations and by the NAR code of ethics, but some rules vary from office to office.
A penny for you, a penny for me: Commission split arrangements
Media reports advise consumers that seller/agent commission fees are negotiable. Likewise, buyer/agent commission fees are negotiable, as well. You’re the one who determines your fees. Some agents charge higher fees because they’re worth more. They can sell to the consumer a higher level of value, so they can increase their fees.
The following list presents some of the most common commission options you may see in the industry:
❯❯ The graduated split: The graduated split is the most common compensation package. You start at a 50/50 split, which is increased to 60/40 and upward incrementally as you become more productive and your earnings reach company-established levels for graduation.
❯❯ The graduated split capped: Some companies put an annual cap on the revenue the company derives from the graduated split arrangement. After they collect the established amount of company commission income, the rest is yours. A per-transaction fee that doesn’t cap often accompanies this commission type. This is fair, in my view, because although you receive all your income beyond the cap, the company still has costs for each transaction beyond your cap.
❯❯ The graduated split rollback: Under this increasingly popular compensation arrangement, which is structured primarily for the benefit of the company, you receive a graduated split, but at the end of each year you roll back to 50/50 or some other established allocation. With this type of rollback, the company has a better chance of making a decent net profit from all earnings. Too often, company expenses and profits are covered by too small a group of agents. By rolling splits back at the beginning of each year, companies ensure that their costs are covered by commission revenue received early in the year. It also motivates agents to increase productivity in the early months to increase their splits over the rest of the year.
❯❯ 100 percent commission: Colloquially, this is known as the rent-a-desk arrangement. Agents on 100 percent commission pay a flat amount monthly to rent space and purchase a few services from the company. From there, they cover all their own costs and retain 100 percent of all the commissions they generate.
Brokerage fees: Don’t bite the hand that feeds you
After compensation arrangements are in place, most brokers add fees to help