Hi all,

I'm working with a broker here in Australia to create the best possible business model. We're chucking out all the old assumptions and are in the process of establishing a win-win model for customers, agents, support staff and management. Here's my question for agents: how do you REALLY want to be remunerated?

1. Salary
2. Salary + commission (how much commission?)
3. Commission only e.g. 100% commission
4. Any of the above plus residuals?

What else are you looking for from the ideal employer/brokerage?

Thanks in advance.

Your question is as good as asking would you rather sell your house fsbo or hire a realtor?

Agents are the same way. There are the self driven agents and then there are the types that want the broker to do everything and give them everything. Now we even have the menu driven agents too.

You need to ask yourself first which of those agents are you looking to attract. You are not going to get them all just as you won't get a fsbo to list with you until they see they need you.

This is business like any other business. Instead of asking how agents want to get paid you ought to ask yourself which kind of agents do I want to manage?

I'm moving more and more towards 100% salary based. I know a broker that has 60 agents. He has 100 listings and are selling about 4 houses a month. He's tried 80/20 split. He's tried 100% commission. He can't afford to pay salary without starting over. He'd have to get rid of the 60 agents I'd assume.

The guy's close to shutting down.

Somethign to think about. Most agents do 2 sales a year and stay around less than 2 years. Do you want to work with 50 agents that do about 2 sales a year or focus on a model that can sell 200 houses a year with 3 employees?

How much can you earn if each of your agent does two sales a year and stays for only two years? Will it be worth your time?

Many of the latest models are based on sales than # of agents.

How will 100% salary based make them more motivated to sell or list more properties? I personally know two agents who are part time because they have another job and get paid, and they do SQUAT with their real estate other than sit around waiting for leads from the office. They're not "hungry" enough to find the business on their own.

I do not think the high turnover with agents would be fixed with a 100% salary; IMHO it would only encourage unproductive agents to stay unproductive.

Now you're thinking. The idea is to get rid of them by hiring only the producers. Your top producer would be YOU ( hopefully ). Your second 100% salary would another YOU. Your 3rd 100% salary guy would be another YOU. YOU would create a system that replicates YOU.



That's why you don't want a lot of agents. They just waste time.

I can't see how a 100% salary based model would work in Real Estate business. At least in the US.

Most people who go into RE do it for the independence, the "be your own boss" of self management and the unlimited income potential. With salalry comes bosses, managers and somebody else expectations and not yours.

Newcomers will cost you lots of money before they will start selling properties so you need to hire experienced ones, and I can't see how you could lure an already sucessful agent to a salary model, they are already making more by comission.

As for me, I like it exactly the way it is, comission only model.

100 percent commissions.

What you are asking is "independant contractor or salaried employee". If we wanted to be salaried employees we would get salaried jobs.

Soon they'll be only two types of agents. 100% commission. 100% salary. My guess is 100% agents will hire 100% employees to work for them.

P.S. it will be increasingly difficult for agents earning less than 95-10% to compete in this industry. One of the reasons why there's such animosity and tension towards discount brokers and fee for service brokers is these new companies are able to offer services they can't.

How can you compete against 500 listing fees without being on
100% commission or salary?

Thanks for all your thoughts. I suppose I asked the question because I wanted to get some ideas thrown at me... which I have! Here's something to think about. There's a group of agencies here in Australia which follow a certain system. Basically, they only recruit people who (1) have never worked in real estate before and (2) have bought their own property before. They pay high base salaries $55,000 plus bonuses to all new agents. However, the new agents have to go through vigorous training and a 3 month trial. If they make it through, they are expected to be earning $75,000 by the end of their first 12 months. After that they have the ability to earn over $100,000. (I don't know the details because I'm not part of the system). I'm not sure if there's much capacity to earn, say, over $200,000. Anyway, they claim that the aim of this structure is to recruit a certain kind of person - someone who is likely to have experience in another profession, "life" experience, as well as home ownership experience - to train them in their ways, etc while achieving high retention and loyal, top performing agents. I am not endorsing this system, and I don't know everything about it - I just present it as more food for thought.

Anna, that's the kind of system that I'm working on myself.
It'll take a lot of upfront capital to get started but hiring people with college degrees or at least have the ability to follow a system of doing things is the key.



It's hard to train an old dog new tricks. The problem with old dogs is you have to get them to do four things.

1: educate themselves.
2: accept new ideas.
3: have a specific plan to change.
4: make it happen.

Most old dogs are in phase 1. Smart companies realize this by paying a salary to people that are willing to follow their system. The agony of training and convincing people to do all 4 steps just isn't worth it.

Realting - PM me if you want the website that explains the system in more detail.

You know, I've been reading Everybody Wins about RE/MAX. At the back of the book it says the typical RE/MAX agent averages 20-22 transaction sides per year. It doesn't say what the average RE/MAX (or what would be more meaningful, the MEDIAN) income is.

So... if a real estate agent is likely to earn the same amount... why would they opt for commission only versus salary + commission/bonus? I can see that a broker might prefer to hire commission only agents... but if the result is less loyalty, higher turnover, etc, maybe salary + commission would actually be better. As you say Realting, what matters more is sales not number of agents.

Anyway, I have worked in various other industries so I'm still trying to understand the various business models in the real estate industry so forgive me if I sound dumb [:)]

I'm glad I found this forum!

Compare to some of the postings here I'd say you're about ten years ahead of most. Dumb questions are good. Dumb people are obvious.


I don't have specific knowledge on the REmax model however based on my experience the 100% agents at remax or any other brands actually operate their business much like a broker. The remax model seems to offer the advantages of running a brokerage without becoming a broker. 100% means you can hire independent contractor agents or employees.




Formost they were sold on the "opportunity" and not the real numbers. If people sat down and study numbers closer they'd think twice.



Let's not assume that just because someone is a broker that that person automatically understands business and marketing.
Most brokers don't understand buzz marketing from a beer buzz. Many brokers haven't looked at many business models to have a clear understanding on what works or what doesn't. I'd put the majority of real estate brokers in the same category of MLMers aka ..network marketers. GET AS MANY AGENTS AS POSSIBLE AND HOPE EACH WILL DO ONE OR TWO. If they don't know any better how can we expect more from them.

Independent contractors allow brokers to avoid paying employee benefits. I would never do salary + commission. If you don't have a proven business model and want to build a large enterprise I'd do 100% commission. Make a little off everyone.

If you have proprietary technology or model I'd do 100% salary..look at ziprealty.com, refin.com, buysiderealty.com.

THE REASON WHY MORE COMPANIES AREN'T MOVING TOWARDS SALARY BASE IS BECAUSE THEY DON'T HAVE ANYTHING FOR THE EMPLOYEES TO FOLLOW. THEY'D GO OUT OF BUSINESS IF THEY TRY.

The only thing worse than paying a bunch of agents to stand around doing 2 sales a year is to pay the same bunch $50K a year sitting on their $$$$$$$$$44. You need a specific business plan with specific instructions for agents to follow for a salary model to work.

Wow, thanks for your insights, Realting. This is all a real eye opener. I can see your point about it not being a good idea not to pay people a salary to do nothing, if you're not prepared to train, motivate, develop them, etc into successful salespeople.

Anna,

RE/MAX agent here. My guess about why they left that information out, is not in an attempt at secrecy but to keep the book from being dated. I am certain that number changes annually. I will see if I can find the number and let you know.

Here is an idea--

If you have a training program that you feel confident about, what about paying for the training program, and pay a reasonable salary for months 1-4. For the next X months wean them off of the salary by reducing it X amount each of month.

Eventually, they are at 100% commission.

I think one of the things you will have to do is to screen people very well. Lots of people think they would like sales, but in actuality don't want to 'seem too pushy', are shy, and a whole host of other things that are incompatible with being a sales person.

So I would think about including some type of personality testing as well as looking at how they excelled at their previous position as indicators of future success at your company. Nothing is 100% but it is better than letting everyone through the door.

I had the wonderful opportunity to spend 6 weeks in Sydney-- FABULOUS city. Flew to Canberra and just had a spectacular time!!

Good Luck!