For the last few years I have been trying to quantify the value of an agent to their company. Sure an agent is expected to produce a certain amount of money for the company. Spread the word about how great the company is to work for. Maybe even bring other agents to work at the company. These are all ways agents add value to a company. What I can’t figure out is how all the ways an agent interacts with a company contributes to how the agent is paid.
In the simplest brokerage model an agent and broker can agree on a commission split of 70/30, 80/20, 90/10 or what ever they think is reasonable. Recently we have started allowing our agents to name their commission split. We have had conversations about 90/10, 95/5, and 100% commission. All of which would be fine provided the agent brings some value to the company. What do you think we would say If an agent walked in the door right now and said he or she wanted 100% commission with no fees? It would all depend on what they are offering in return. If this agent lists and sells 40 homes a year, and is interested in being a company guy, why would I say no? On the other hand if he only sold one home a year and is just trying to avoid fees, why would I say yes? We understand that there is a value to having 40 more listings. The agent is doing the work, advertising the companies name, and adding value to the company, they should be rewarded.
At the same time we aren’t willing to give away the shop, we have to make money some how right? So maybe we can’t do 100% with no fees. It all depends on what the agent needs from us. I’m sure we can work something out that rewards the agents true value.
In the last few years I have talked with many firms in the Austin area. I have interviewed for jobs at several. All just to understand how other companies quantify an agents value. One of the the largest companies in the Austin area has a 70/30 split for their agents until they sell over $2 million a year. That same company resets its commission every year and the agent has to start back over. If I was selling 5-10 million a year, I sure would not stay at a company who puts me in the same category as someone selling under 1 million each year. That is why we don’t have standardized arrangements with our agents.
The value of followers
Even if you don’t sell 40 homes a year you may do other things well that is of value to our company. For example social media followers, or email marketing lists. A database of names is also very valuable. I understand that agents don’t want to give up their clients names in case they decide to move companies. We don’t think an agent should give up their lists at all. We do however see value in marketing a co-branded message to an agents prospects and friends. It is a value added proposition to the agent, to the customer, and to the broker.
But again, what is the value to be able to market to those individuals? It is almost impossible to quantify. An agents personal connection to hundreds or thousands of people has a large value. How do real estate firms pay for that now? They don’t.
The value of goodwill
Other agents are passionate about certain charitable causes. How does that equate to your pay. Certainly if an agent volunteers at a shelter for dogs 30 hours a week, it would be hard for that agent to sell 50 homes a year. But is that agents value any less? Maybe they have a higher value. The value of goodwill by a companies employees or agents is unmeasurable. Agents should not be discounted just based on the amount of production they do in a year. They should be valued on who they are and what they do for the community around them.
Quantifying an agents value
We have worked hard to figure out the exact value of an agent to our company. As the founder it is hard for me personally to build a formula that takes every possible variable into consideration. Each agent brings unique opportunities and requirements to the table. No standard commission arrangement or formula could possibly ever equate for all the variables. This is why we allow each agent to design their own commission arrangement. Hopefully we can understand the value of every agent at our firm and build lasting relationships. By no means have we solved this formula. It may not be solvable. All we can do is try to make the best arrangements of our agents as possible, understanding what is true value of someone working with our company.
About Ed Neuhaus
Broker and founder of Neuhaus Realty Group. I started working in real estate as soon as I could push a lawnmower and help clean up investment properties for my parents. Investing in real estate has always been a passion and now I have turned that passion into a way to help others. Buying and selling homes for others is just one way I think I can make the world better. No sales pressure, no gimmicks, just an honest work ethic gets the job done. Let me know how I can help you. Give me a call today at 512.366.3720
