What motivates you to attend an open house or sell one property instead of another? Are you strictly in the business of satisfying your clients, or do you occasionally cash in on your efforts? Chicago Agent talked to several real estate professionals to determine if Realtor incentives are worth their salt, or if it’s a wasted effort. The answers may surprise you.
By David Himmel and Jennifer Morrell
In today’s real estate market, it’s no surprise to see an increase in the number of dangling carrots for Realtors. The growing trend of offering increased commissions, bonuses, trips and shopping sprees is evidenced in Chicago Agent’s own “2.5 Plus,” published in each issue. The section is built by compiling a list of any extra incentive or commission more than 2.5 percent that is advertised in that issue. A couple of years ago, we’d be lucky to see five to seven entries in 2.5 Plus. Recently, we had about 20. To learn more about the success rate of our advertisers’ incentives, see the sidebar “What Works” on p. 55.
Companies are obviously competing for agents’ time, interest and motivation to sell their properties by offering a bevy of incentives. But is this form of professional bribery working? The answer changes depending on the aspect of real estate being referenced and the type of incentive offered.
HOOK, LINE AND SINKER
Incentives offered to agents range from tiered programs and gift cards to tropical trips and cold, hard cash. Overall, these incentives seem to work in bringing an agent in when he might not have made the time before. While some agents aren’t even aware of an incentive being offered at a broker open or given away when a home is sold, others might attend a party or open to get a bite to eat and a $50 gift card. And, says Amy Settich with New West Realty, that’s ok. The exposure is the important element.
“For grand openings, I give away Nordstrom gift cards to the first 100 agents through the door; they’ll come for that, says Settich, VP of sales and marketing for New West. “It doesn’t quantify sales, but 10 Realtors might come from one office and eat and get a gift card, and that’s fine. It creates a nice turnout for developers and creates a buzz in the real estate community. It creates, at least, branding for the company and lets the agents know the property is there.
“Agents like to know about the models, and the grand openings get their attention,” Settich continues. “It works well to throw a nice party and let them see the model. The cards help get them there, and once they come, it creates branding.”
Ron Ruby, broker/owner of WEICHERT, REALTORS – First Chicago, and sales director for 550 St. Clair, says getting agents to attend an open house, especially when the market is slow, is generally by bribing them. “You have to offer at least food, sometimes drinks and, lately, gift cards, bottles of wine or raffled-off prizes,” Ruby says. “The intent is not to translate [the visit] to a sale, but to make the agent aware of the property. The gift card or door prize incentive gets people in the door and is effective, in a way, because the more people in attendance at an open house, the better. It provides branding, awareness and recognition. It is not effective at selling the product, however.”
Trump International Hotel and Tower recently had Donald Trump visit for a large, well-attended broker event at the sales center, across from the building. Trump announced at the event that the commission on sales in the building would be raised from 2.5 percent to 4 percent.
“With the increased percentage, agents will reach back into their pool of clients to find buyers,” says Tere Proctor, director of sales for Trump Tower. “These are big numbers. A one-bedroom unit costs $900,000 to $1 million, and 4 percent of that is significant.”
Proctor says while the weekly broker opens aren’t enormously successful, they keep the building on agents’ radars. “Even if only 10 or 15 show up, they are still enlightened,” she says. “We do a drawing for a spa basket with Trump Spa products as a ‘thank you’ to the brokers, rather than an incentive. We are fighting for agents’ time, and it’s a nice thing to do for them. But the spa baskets aren’t really the draw. The increased commission will bring the brokers in.”
Whether or not you drive an hour west, north or south to attend an open house to try and get a trip to Hawaii, it’s still nice to win. Baird & Warner agent Terry Bulava says she never expects an incentive, but she was certainly rewarded for her attendance at a developer’s office. Bulava enjoyed a trip to Maui last November on a builder’s dime. She had clients moving from Long Island to Elgin who wanted to buy new. Bulava says they looked at several builders’ properties, but the clients found the mark in a Ryland home.
“They were having a drawing at one of their offices, and I threw my card into the drum,” Bulava, who specializes in Schaumberg and other Northwest suburbs. “A few months, later I was in a meeting and two women from Ryland Homes came into the office with balloons and a cake. There were three items: a car, a trip to Hawaii and a Tiffany’s shopping spree. I won the trip. It was a big surprise; I’ve never won anything in my life.”
TIERS OF JOY
The most organized and sophisticated type of incentive is the tiered program, and determined agents seem to be cashing in.
Although Koenig & Strey GMAC Realtor Sophia Klopas says incentives are just a bonus, she regularly finds herself selling – and buying – homes from Centrum Properties. (She has bought five times in the last four years.) Centrum Properties has a Realtor incentive program in effect.
Jennifer Arons, senior VP of sales and marketing for Centrum, describes it as an appreciation program. “We have very loyal brokers,” she says. “The program is really for the people who continuously work with us, as a ‘thank you.’ They’ve lived and worked with our product, and they can talk about it.”
Centrum’s Affinity Program has a point structure designed over the course of one year. When an agent sells his sixth Centrum Property home, he gets a point added on to his commission. Every property sold after those first six garners another point. At 16 properties sold, the agent gets a two-point bonus. Should the agent sell 50 homes, he receives a $100,000 bonus.
Another perk of being part of the Affinity Program, Arons says, is that when Centrum hosts an open house, loyal Realtors get the inside scoop on pricing and availability. “It’s a benefit to them, because they get first choice of the product,” Arons says. “We know that their clients are good so they’re pre-approved, and they know that when they walk through the door. It makes for a friendly, easy way to do business.”
Klopas has been in the real estate game for seven years and says that she wouldn’t take a client somewhere, or buy something herself, just because of the incentive. If it’s the right home, the incentive is more like a cherry on the proverbial sundae.
Dearborn-Buckingham Group also has an incentive plan that is more a pat on the back for its Realtor friends. The Dearborn-Buckingham Group Realtor Recognition Program is based on five tiers of incentives.
The Bronze Level – a $100 Lettuce Entertain You gift card, a Waterford pen, a one-year subscription to Success Magazine and a certificate of appreciation – is achieved after the close of the first property.
At the opposite end of the spectrum is the Diamond Level, which is awarded after the close of the fifth sale. The Realtor receives a $500 Lettuce Entertain You gift card, a spa package at Elizabeth Adams Spa, two weekend nights in the Four Seasons Hotel Chicago and a full-page ad in Chicago Agent magazine.
“We’re very excited about our Recognition Program,” says Christopher Coleman, president of Dearborn-Buckingham. “We want to strengthen our relationship with the broker community.”
When all else fails, money makes the world go ‘round. Winthrop Properties rewards Realtors not with a super-sophisticated, tiered program, but by paying a portion of the commission about 30 days after a contract is signed as opposed to waiting for the closing.
“There’s often a long delivery cycle for new construction properties,” says Bob Horner, partner at Winthrop. “We understand that Realtors have a cash flow need and, by paying some of the commission early, we’re able to put money in their pockets.”
“To get outside agents to sell, we might offer a $5,000 shopping spree or an increased commission,” says 550 St. Clair’s Ruby. “These are the most difficult to measure. Occasionally, agents can push a buyer to buy because of incentives; but sometimes people won’t even know they exist. We are now trying a 3.5 percent co-op, because we got no direct response from the shopping spree.”
Ruby also notes that developer sales agents are offered incentives to sell a particular property. For example, a three-bedroom unit might bring a gift card for the agent or sales person. “Incentivising developer agents works, because it gets them to look at one unit versus another in a development,” he says.
Many times, old-fashioned courtesy and special treatment work best. New West’s Settich says Realtors come back and bring their clients to grand openings because of the personalized attention she gives them.
“I’ll send a specific gift to a Realtor, like a holiday gift, and that gets me more mileage,” Settich says. “A customized response brings results. And, our staff is good at taking care of them, too. They are in and out with what they need in 20 minutes. I’ll also call agents when there is a lowered price on a property, giving them more personalized attention.”
Office presentations that inform agents about available properties seem to be a viable technique as well. “I give presentations at Realtor office meetings,” says Settich. “People are professionals, and they all just need information. They can’t make a client purchase a property just because they want to win a trip. It boils down to the client and what he needs.”
Trump Towers’ Proctor also presents for Realtors. “I actually go into brokerage offices and give presentations,” she says. “I talk to the manager and agents, bring brochures, tell them about new incentives and give them price ranges. If they aren’t coming to us, I’ll go to them.”
Cory Robertson, director of sales and marketing for Belgravia, holds events in irresistible places and provides a fabulous ambiance, complete with a view and entertainment.
“We don’t offer incentives to direct clients [to buy our properties], Robertson says. “We don’t want to mess with people’s largest investment. We will have a grand opening in an interesting location, provide entertainment, and make it more than just another showing; we give people a sense of what it’s like to live there.”
Robertson gives an example of how his well-attended parties pay off. “ For our first broker opening of 600 Lake Shore, we had an interesting venue and opportunity at the W hotel, across the street from the property and sales center,” he says. “We held the party at the restaurant at the top of the hotel. It faces the lake, you can see Navy Pier, and it gave people a sense of what it’d be like to live in the 600 Lake Shore. It was not the typical cheese-and-veggie-tray event. We had 700 attendees, and half of those agents visited the sales center across the street to get information, brochures, etc.”
The event, which didn’t include a formal presentation of any sort, translated into about 30 sales.
Other than providing exposure for the property and creating brand awareness, incentives do not seem to function as a main source of motivation for Realtors. Most Realtors are too smart to conduct business on behalf of anyone or anything else but the well being of their clients.
And some just plain don’t believe in incentives. “Most of the gimmicks don’t work,” says New West’s Settich. “I have done so many things: trips to Paris, airline tickets, commission points and bonus cash. It has never brought any traffic or been overly successful. I have given 3.5 percent, 4 percent, and advanced commissions, and I’ve never known any of that to work, either.”
She recounts a specific incidence when an incentive was a waste of time, “Once I send an invitation with a soundcard inside that played Italian music. I was giving away a trip to Italy for agents for closed sales or non-contingent sales on new construction. Nothing happened; it just didn’t work.”
THE CLIENT PREVAILS
While we could argue all day about whether incentives are a necessary evil, or if offering gift cards and more money doesn’t change anything about how Realtors approach their business, everyone seems to agree that, ultimately, the client is who matters. Treating the client well by providing excellent services and helping get him in the property that best suits his needs is going to pay dividends over time with referrals and repeat business. An irritated or ticked off client is not worth a trip to the Bahamas or next season’s Jimmy Choos from Nordstrom.
“First and foremost, the majority of Realtors take their job seriously and get the home that best meets their client’s needs,” says Bob Horner, a founding partner of Winthrop Properties. “Most Realtors will not take their buyers somewhere because of a commission if it will be to the detriment of their client.”
Baird & Warner agent Bulava is in the game for her clients, period. “If [an incentive] happens to be there, then it happens to be there,” she says. I just take care of my clients. I don’t look for or expect incentives.”
Ruby echoes her mentality, “If you’re a good agent, you’ll want to do the right thing for your client, whether there is an incentive or not.” C.A.
Jennifer Arons – Senior Vice President
of Sales and Marketing
Terry Bulava – Agent
Baird & Warner Schaumberg
Christopher Coleman – President
Bob Horner – Partner
Cory Robertson – Director, Sales and Marketing
Ron Ruby – Broker/Owner
WEICHERT, REALTORS – First Chicago
Sales Director, 550 St. Clair
Amy Settich – VP, Sales and Marketing
New West Realty