Like most real estate agents, I get postcards in the mail from real estate companies that are recruiting agents.
The postcards are pretty much the same. They promise that if I go work with the company, I will get to keep more of my commission and that I will pay lower fees and I will have more opportunities and get more business. They all have state-of-the-art technology and training, too.
It never impresses me when companies advertise that they are less expensive. In some cases those lower fees and higher commission splits mean more out-of-pocket expenses. I look at the list of what the company provides and I rarely find anything that I don’t have already.
Why would I want a free template Web site when I already have Web sites? Anyone can get a cheap or free e-mail account, yet e-mail accounts are used as selling points, too.
I already have a phone and it fits in my pocket, so I don’t really need a desk in an office to put it on, or another phone line to have to check for voicemail.
Free copies are nice, but I know how much a copy costs and am not willing to give up 20 percent to 60 percent of each commission so that I can have free copies.
The $30 dollars a month that I spend on copies at the local copy shop doesn’t add up to much, and I save time because the copy shops are close to home and they will make the copies for me and have them ready for pickup when I arrive.
If I have to pay for services that I don’t need or use each month then it doesn’t really matter how inexpensive they are — it is still an expense that I don’t need to incur.
There are a couple of common business models for real estate companies:
- There is the model where the company takes a huge chunk of your commission but gives you a place to work, a phone, a front desk, unlimited copies, a bunch of software, and access to a manager whenever the need arises. The environment is almost like corporate America, complete with meetings and co-workers, office gossip, parties and events.
- Then there is the model where the company lets you keep most of your commission but it gives you nothing unless you pay for it — and everything seems to be more expensive than it would be if you bought it yourself.
I have learned something important this year: having lower fees makes a difference in the bottom line. After changing real estate companies, my commission splits went up and my expenses went down. I no longer have some of the services that I used to have, but I was not using those services; I was just paying for them. …CONTINUED
The amount of money that I pay each month for just about everything needed to run my business has gone down. After several months of working that way, I started noticing that I have more money. I noticed almost immediately that I was more motivated to go out and sell. Each sale has a bigger impact on my bottom line.
As the year comes to an end, I can see that my expenses were too low. It is not having a negative impact on my business, but if I don’t spend it before the year is over I will have to send it to the Internal Revenue Service.
The amount of money that a real estate company takes out of each check is important, but it is also important to understand or to figure out what kind of an impact the money has on your business. In some cases the company that takes less may cost more because it charges for everything.
It wouldn’t hurt as a year-end exercise to check and see what you are paying and ask yourself if you are getting the most for those dollars, or what would happen if you stopped spending them the way you spend them today and spent them some other way. If the fees are low but you get even less in return, then they are too high.
If paying for that big brand name generates more business, then pay for it. It is worth every penny if the brand is what makes the phone ring.
Don’t choose a real estate company because it has lower fees. Take a close look at what those fees are paying for and make sure that the fees are for items that you need or want to run your business.
If you need an office with an exciting environment and state-of-the-art software, and a big brand to succeed, then having splits and fees that equal 30 to 60 percent of each commission check is worth it.
Teresa Boardman is a broker in St. Paul, Minn., and founder of the St. Paul Real Estate blog.
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