errors and omissions insurance, and franchise fees.
❯❯ Transaction fees: Many brokers charge agents a per-transaction fee of somewhere between $150 and $500 to cover the cost of processing the paperwork that accompanies a real estate sale.
I started charging my clients a transaction fee of $150 in 1993. At that time, I was among the first in the country to do so, joined by only a few other high-producing agents. Over the years, I raised the amount to $495. Today, it’s the real estate companies that are charging the transaction fees to the agents. However, with a little advance planning and sales tact, you can pass the transaction fees along to your clients.
The first step in being able to charge a transaction fee is believing that you’re worth the additional money. You can’t charge the fee if you don’t believe in your extra value because you won’t be able to defend why you’re worth more. Everyone is quick to point out that real estate commissions are negotiable. If that’s the case, why not charge more? If your service is better, your skills are better, and the outcome for your clients is achieved with less risk, you’re worth more money.
To show my value, I explain to clients that when I first started real estate sales, agents had three-page agreements, whereas now some agreements are more than 50 pages long with disclosures included. I also note that agents now manage multiple inspections (such as radon testing, pest inspections, and so on) when before only one inspection was performed. Transactions involve more processing than ever before.
❯❯ Errors and omissions (E&O) insurance fees: Many brokers charge an E&O insurance fee on a per-deal basis, which often adds $100 to $250 to each transaction to cover premium costs. E&O insurance protects professionals should they make a mistake in service or representation. In such an event, the insurance company covers legal fees and settlement costs.
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What really matters? Looking at size, online presence, training, and market share
Personally, I think size can make up for other deficiencies in real estate companies, and here’s why:
❯❯ Companies with a large number of agents create a large listing inventory. As a newer agent, you’ll find it easier to get other agents to let you post and advertise on their properties, leverage their properties online on your own website, market behind their inventory with direct mail, and work open houses for them if they have 15 rather than 2 listings apiece.
❯❯ Large companies enjoy economies of scale, allowing them to provide a greater degree of service at a lower price per agent. As a result, they can offer more training, more marketing, and more exposure than smaller companies can afford to provide in most cases.
❯❯ Because of their size, large companies can negotiate better rates for online marketing ads; website-development costs; click-through ad banners; SEO costs; third-party online lead generators like Zillow, Trulia, and Realtor.com; and mortgage rates. However, large companies follow no hard-and-fast rule for how they direct their savings. Some companies decide to turn a larger profit margin for the company. Others – the ones you’ll most want to join – pass on the benefits to their clients and agents.
❯❯ Large companies hold a dominant portion of market share in their communities. As a result, they have the most prominent reputations and earn the greatest slice of regional business. They tend to have more inbound business, which can really help a newer agent.
Prioritizing your needs and expectations in a company
Before you can determine whether a company is a good match for you, you have to be clear about your own values and expectations so you can see if they’re shared and supported by the company you choose to work with.
Know your values
Ask yourself: What are your core values? What beliefs and principles guide your life? What would you hold dear even if it proved to be a competitive disadvantage in the marketplace? Even if the marketplace or business climate changed, what aspects of how you work are nonnegotiable?
Here’s an example. In my company, Real Estate Champions, one of our core values is “exceptional execution of the fundamentals.” I believe in and have seen the truly astounding results that occur when people apply the fundamentals of sales and business consistently, without reliance on shortcuts or miracle marketing systems. In truth, our company commitment to the fundamentals means that we attract fewer people. Obviously, it’s easier to sell agents on magic formulas that require no work, energy, discipline, or rigorous activity. But in spite of the competitive disadvantage it presents, our company belief in disciplined fundamentals doesn’t ever change. It’s a core value, and it’s a truth we adhere to.
Establish your expectations
What do you expect from yourself over the next 6 to 12 months? What do you expect from your company over the same time period? What will your new company expect from you? What does it consider to be the minimum standard for new-agent production? What does it consider to be average, or good, production? What do you need to earn in income to make this worthwhile for you? What is the most that anyone has ever produced in the company? What is the most anyone has done in your market?
Also, beyond expectations for the next year, I suggest looking a few years down the road. What is the progression of income and units likely to be over the next few years?
Before you choose a company, align your expectations with the company’s by taking these steps:
❯❯ Set your goals and expectations for the upcoming year. Establish your targets for gross income, number of transactions, number of listings taken and sold, and number of buyer sales.
❯❯ Know the expectations and typical production levels that exist within the company you’re considering. If your targets are high, you need to join a company where established inventories and support systems help you jump-start your business for quick success. If your aims are lower, you need to be sure that they match company expectations for new agents.
With all the options for where to “hang your license,” you want to shrink your list down to your top two or three firms quickly so you can really study each one. The upcoming section helps you winnow it down.
Completing your homework
Follow these steps as you research each of your top-choice companies:
1. Rank your top-choice agencies based on your views as a consumer. Before you color your opinion with facts or market statistics, ask yourself: What is each company’s reputation? Based only on information available to the general public, what impression does the company make? I tell you to do this because when you join