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Jack, Other/Just Looking in Edison, NJ

Is it reasonable to ask an agent about their split arrangement?

Asked by Jack, Edison, NJ Mon Aug 13, 2007

In a recent interviews, one agent gave me a hard time, others answered. I was not comfortable with the rent-a-desk agent as she was keeping 100% of the fees and simply paying a rental fee. I thought I was overpaying since I wasn't getting anything from the big name company. Another agent split her fees with her company and I felt better about paying the bill because I was getting more value. Do most consumers realize that in many cases the agents don't share commissions with their companies? Is it OK to ask agents about this when choosing an agent?

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I think you answered your own question. Some do some don't. It's sort of like asking someone how old they are or how much they weigh. If they don't share commisions with their companies they are either very good negotiators, in which case you want them on your side or they "rent a desk". If this is the case just ask them to justify what value they will bring you over the "big name" brokers, maybe they will. I would say it's ok to ask, just expect either of the two responses.
3 votes Thank Flag Link Mon Aug 13, 2007
Jack,

It seems to me that your real question is not about who makes what. Help me out if I am reading this wrong. I think that what you are asking is who does what, who can you hold accountable, and who exactly are you hiring to perform which job(s)? I wasn’t sure if you were saying the rent-a-desk agent was from the big company, or that was a different agent. Nonetheless.......

When you hire a buyers agent, you are relying mostly on the agent and only minimally on the company, providing all goes smoothly in the transaction. The company and the broker do not have much hands-on involvement in most buyer transactions. It is the agent who will perform most of the services in traditional brokerages. There are exceptions, particularly in new business models.

When you hire a sellers agent, you might rely mostly on the agent, or dually on the agent and the company to varying degrees. I think this is the heart of your question. How do you know from one situation to another? The commission split may not provide an accurate answer, and her is why. Take three different rent-a-desk agents (as you call them.) One rent-a-desk agent has two assistants and maintains a four figure monthly ad budget. Her assistants have computer, graphic, and real estate experience. She has a storage shed at her home with a complete inventory of signs, riders and she owns 15 lock boxes. We’ll call her always ready Anna. Another rent-a-desk agent is a one man show with only basic computer skills. He produces basic brochures, has no ad budget, and has two signs that he rotates between his listings as he signs them. We’ll call him always behind Bob. Then, there is agent number three, always charging Cathy. She works alone, without an assistant, and is a truly amazing one person army. She is organized with systems in place and an efficient use of all the latest tools. All three agents are 100% commission split agents who pay only desk fees, yet the value each brings to the table is vastly different. Bottom line: The commission is not the telling secret of performance and results.

Let’s not forget the agent who works in a traditional brokerage with a shared split and shared expenses with their broker. This agent relies upon her brokerage firm to provide lockboxes, signs, marketing support, advertising support, and more. Items such as tours, floor plans, and brochures may fall to either side of the table, broker or agent depending upon the company.

I think your point in knowing who you are hiring is valid. I just think commission doesn’t answer the question. You could make a list of specific questions to ask. There are no right or wrong answers, as it pertains to who does what. Your confidence will rise or fall based upon how the agent delivers the answer. Do you feel confident that the tasks will be done and done well.? Do you feel confident that you will be represented well? And my final point is that even if the company does everything for the agent, you still need to have a sellers agent who will be able to represent your interest well, knows the inventory, and negotiates the best contract for you.

As an aside, I am a Broker, and we do most everything for our agents so that they may focus their energies on knowing the inventory, and being with customers and clients. Our office staff provides a tremendous amount of hands-on support for agents. Some agents utilize that benefit more than others.
2 votes Thank Flag Link Tue Aug 14, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
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Hello Jack:

I think you can ask anybody anything if you want to, including the commission split between agent and broker. Whether they feel comfortable to answer your question is one thing, and how you learn and interpret their answer is another thing.

However, I will strongly advise against taking somebody's numeric answer and use that either for or against the person or his/her service.

There are so much into the commission splits and how each company charge and/or what they pay for their associates. Unless you have a very complicated chart and do a thorough interview, getting down to the details, you won't be able to know how the commission split has to do with the service you are getting.
The companies might or might not pay or charge their Realtors - E/O insurance, printing, open house signs, desk charges, internet presence, Txn coordinator, first rate website, great feeds and placement on the internet site, the company's affiliates; locally, nationally, and internationally (my company is local but we are affiliated with Luxury Property Portfolio and several large relocation companies), the quality and placements of the ADs to attract buyers; training (marketing and contract), support , .etc. ... marketing support, .., the list can go on and on..

So, it’s difficult for anybody to understand what they are getting just by the commission split level.
For newer agents with lower commission split levels, it does not mean they won’t be the hardest working agents for you, and as a matter of fact, they just might because the serious ones want to get started and built a great real estate career.

I think what you really need to consider is not the commission split, but interview them to find out the exact service you will be getting from the Realtors. That's why we do listing presentations. I offer service and value to my clients, whether it's from me, personally or through my affiliation with my company; and that’s what your realtor should do for you.

Sylvia
2 votes Thank Flag Link Tue Aug 14, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
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I don't split my fees with my brokerage, and I happily explain why to my clients. I am with a 100% company in which we keep all of our commissions, but we pay large monthly fees in addition to covering all of our own expenses. Agents that are not successful cannot thrive in this environment because you shell out a couple of thousand dollars a month, regardless of whether you have done any business or not. The top producing agents in the traditional line companies in my area (Arizona) generally reach a point where it doesn't make sense to kick so much to the brokerage. It is a graduation, if you will, when an agent achieves ample success to take this plunge.

Don't confuse how much your agent shares with the house for the value you are getting. As long as the rate charged to you is competitive, does it really matter how it gets chopped up? The value is having an experienced and highly productive agent representing you to ensure that you command the highest price that the market will yield for your home. I assert that the majority of such agents have outgrown the standard line company.
2 votes Thank Flag Link Mon Aug 13, 2007
I would not have a problem answering this type of question from a client or prospective client. In fact, should the question come up, I have a pie chart that does an excellent job illustrating to a prospective client on how my brokerage fee is divided up including the type of expenses. I would venture to guess that it is human nature for most people to feel uncomfortable sharing details of their income & expenses with anyone other than their spouse or significant other (regardless of their profession). Full-time experienced real estate professionals know their numbers and what it takes to market and sell a listing as well as their costs associated with servicing a buyer client's needs in finding and purchasing a home. You may not agree with the data or how much fee one particular agent charges but at least you will have a better understanding where they are coming from. Keep in mind that both time and expertise are usually an agent's most valuable assets and sometimes difficult for a consumer to quantify. With home inventories growing and the number of days on market increasing in most markets around the country, the carrying costs for an agent to service a listing go up as well. My guess is that you or anyone else would not regularly show up for work or be motivated to do a great job unless you had some reasonable assurance that you were going to be compensated and hopefully make a profit after expenses. Do you agree? Food for thought...
2 votes Thank Flag Link Mon Aug 13, 2007
TED SHOOP, Real Estate Pro in Buford, GA
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Hello Jack, first great question - second you should ask for a P/L - this is a business transaction, there will be both variable and fixed cost associated with the transaction. The commission you pay should cover this cost, given the budget and marketing plan created by the agent is a good one and you have agreed to and understand how your money is being spent. Again, the key is that you have input and control over how your money is being spent, regardless of how the agent compensates their broker.
1 vote Thank Flag Link Mon Aug 13, 2007
The value of the portion of the fee the agent shares with his / her broker is mainly for the agents benefit.
1. The big fee splitting company does national advertising. giving the agent name recognition beyond their own name. 2. The big name company has referral sources such as relocation departments, and mortgage divisions to divvy out incremental listing opportunities to its agents. 3. Big companies have extensive training programs for their agents.
Experienced agents benefit less from these features as they 1. Have built their own personal reputation 2. Have built their own referral networks 3. Have found less expensive and more detailed educational opportunities.
Many people feel more comfortable with a brand name. Oh it is OK to ask about fees. and it is ok to walk (before you sign a contract) if you don't like their answer.
1 vote Thank Flag Link Mon Aug 13, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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Jack:
I am NOT a real estate agent, but I know the industry extremely well. I agree with Paul and thought about bringing that up in my last post. But from your original question, I felt your comfort level with the individuals you talked to was more important and I wanted to make you aware of the next step when it came to splitting fees.

So, let me name some names for you since I'm not an agent and I don't have a vested interest. Most Century 21 offices and their agents probably AVERAGE a split of about 50/50. Most ReMax agents pay a fee to the company and keep 100% of their commissions. When you interview in YOUR area, see what market share and level of experience ReMax has verses Century 21 verses the company and agents you are talking with. According to Remax's web page "no one in the world sells more real estate." According to Century 21's web page "one of the most recognized brand names in the world." (By the way, C21's brand recognition is probably #1 in real estate but their claim of "one of" includes all industries and brands such as McDonalds). Both companies are franchises which mean that they are independently owned an operated but follow company procedures. My guess is that 99.9% of the time your agent at either of these companies are independent contractors which mean they are their own bosses but have to follow company procedures.

Now, I just used a privately held company (I won't name names here) because they said they used the "team" approach. I had two agents, the luxury agent and the Broker-in-charge all come to impress me and see the home. In the end, when a different agent holding the open house did more harm than good, the Broker-in-Charge basically said that all the agents are independent contractors and he had no control over them.

Finding an agent is a very personal decision. You have to have that right fit. The rent-a-desk agent that you talked with wasn't a right fit. But I don't think it was because of the rent-a-desk arrangement. I hope this helps you. Let me know if any of this needs further clarification.
Good luck,
Ruth
Web Reference: http://www.oak-park-il.com
1 vote Thank Flag Link Mon Aug 13, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
I am not trying to ask an agent for their P&L. If the example of the rent-a-desk agent, understanding her business arrangement told me that I was entirely dependent upon her and that the company wasn't really involved. In the example of the agent who split her fees with her company, I gained an instant understanding that I was hiring an agent and the company both. When I tried to ask agents about what they did versus what their company did, I got evasive answers. I had agents tell me it didn't matter the company, only the agent. By knowing the split arrangement, I am able to come to a conclusion in my mind of a joint responsibility between the company and the agent. I am not asking about their income for the year, their expenses, or any other personal data.
1 vote Thank Flag Link Mon Aug 13, 2007
Could the perception be: Corporations set their prices competitively commensurate with value provided and individuals just charge whatever the market will bear regardless of value provided? Could perception be the inverse of reality?
0 votes Thank Flag Link Tue Aug 14, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Hi Jack,

I think that’s a perfectly reasonable question to ask. But there is a much bigger picture to focus on when asking this, and that is that despite the fact that the agent keeps 100% of the commission, they are also responsible for 100% of the costs of servicing the listing. Whether an agent pays these costs to their company or directly, they are still being paid. I wouldn’t be concerned too much about this anyway, because your listing contract is actually with the “company” and not the individual agent. BTW, I am not an agent who keeps 100% of the commission.
0 votes Thank Flag Link Mon Aug 13, 2007
Yes, it is reasonable to ask. Not only that but you need to know what they put in the MLS for the co-broke. If they charge you 6% commission and only put 2% in the MLS as the co-broke, very few other agents will show your home. If they put 4% in as the co-broke, you are getting your listing agent for very cheap and should have more buyers agents showing your home than usual but probably less marketing dollars spent than usual. Don't just assume that if you list for 6% that the fee is split 50/50. Also, do NOT take their word for it that the "standard" commission is 6%. If they say that, make them show you all the listings in your area and in your price range. If it is anything like Oak Park, 16 listings had a co-broke of 2.5%-x, 2 listings had a co-broke of 2.5%, one listing had a co-broke of 3% and one listing that had been on the market for over a year had a co-broke of 2%.

Also, if I were to interview agents again to sell a million dollar home, I would make sure the agent OWNED a million dollar home. I asked many agents how many million dollar homes they had sold to get an idea of their experience level in this upper bracket. But I don't think that was enough. It's a whole different mentality. An excellent agent will not be afraid to tell you how successful they are.
Ruth
Web Reference: http://www.oak-park-il.com
0 votes Thank Flag Link Mon Aug 13, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
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