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Raising the Rate:  New Ways Agents are Getting Higher Commissions 

by Liz Ganshirt

Going Above and Beyond

Clients may want to discuss or disagree with an agent’s commission standards, but in the end, the agent’s willingness to advocate for clients is what matters most. Agents are advisors, experts, strategists and advocates for their clients, helping them make the best decision. Honesty and a forthcoming professional approach is what brings people back, and that includes commission discussions and what the agent deserves.

For example, Jeff Gregory, the owner and managing broker of Realty Executives in Plainfield and Shorewood, earns his commission based on the following: the marketing and advertising budget for each seller’s listing; the amount of work that goes into selling that home; and what he deems appropriate. In other words, the commission he earns has nothing to do with the price point of the home he is selling.

“In Joliet, price points are low, so I decide the lowest amount for which I am willing to work for,” he says. “I take into consideration the split, how much I need to make in terms of running my business and what that requires. Homes priced $25,000, $100,000 and $300,000 all require the same things – ads, marketing, decluttering, etc. I made a business decision for myself to be upfront with buyers and sellers as to what my minimum fee is. My commission is usually paid for by the seller, and if that’s not met by the seller, the buyer pays the difference.”

Gregory’s commission structure started with short sales, and there were several in the Joliet/Plainfield area. Even sellers who are underwater and upside down need to find a buyer, Gregory says, and for his time and investment to sell a foreclosure, he deserves to be paid accordingly. In fact, his commission structure hasn’t been a problem with prospective clients, even when dealing with short sales and foreclosures.

“I’m usually told that I’m the first person to actually want to work in (a lower) price point, which not a lot of agents do,” he says. “Adjust your business model and make it so it works for you with return on investment.”

Two years ago, Gregory received a call from someone whose brother had died and needed to sell his home. Because there weren’t any reliable comps in the area and the home was in poor shape, Gregory priced the home at $35,000 and charged the seller a flat fee for his work. The client agreed; the house sold for $17,000.

“If you plug in the numbers, looking at less than $1,200 for two agents to split, as a business person, I don’t know where that makes sense,” he says. Some people have had issues with his fee, Gregory adds, but usually, those people are not the sellers. “This client’s lawyer called me about my fee and was questioning it, and I asked him if he wanted my thoughts on his fee,” he says. “My flat fee was a substantial percentage, but I got a cash offer within a week on the home. I’m not going to work for 50 cents on the dollar, and the seller agreed to the fee. I don’t want anyone to be taken advantage of. I always discuss everything with the client up front, and get the agreement in writing.”

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Comments

  • Gary Lucido says:

    I looked up the history on that Mokena listing. They originally priced it at $1.175 MM back in 2008 and then $850K in 2010/ 2011. So no great miracle that the house ultimately sold when listed for $795K. Now, granted, it was listed in late 2012 at $800K but the market is much stronger now. I just don’t believe that the agent makes that much difference unless you are comparing to those agents that are unresponsive and use crappy photos.

    Another issue I have is the belief that a higher co-op makes a difference. If it is true then those buyer agents aren’t acting in the best interests of their clients are they?

  • Mike LaFido says:

    Gary, I can appreciate your response “Does a higher co-op make a difference?” It’s been my experience it does (from both research and experience on the listing side). The flip side of the coin (offering 2% or less to buyers broker) has a negative impact (from both research and experience on the listing side) on both the days on market and the list/sale %.
    As far as the marketing being much stronger…that is such a general statement. The market in Mokena for 750k plus homes is worse than last year. Feel free to check out the data from Info Sparks. This particular homes
    11.3 months of inventory. 7+ is a buyers market (up from 9.2 last year)
    Homes are selling for 91.7% of original asking price (down 95.4% last year).

  • Anthony says:

    Great feed back Mike! I looked into both, and I too agree that you need to have full research to make an opinion. Thanks!

  • Gary Lucido says:

    So all those buyer’s agents that are being influenced by higher or lower co-op commissions are doing a disservice to their clients by steering them to properties that will make them more money. Right?

  • Earl Ruthman says:

    I believe almost 100% of realtors will do what is best for their clients (seller and buyers). The only issue i have when i am looking at the coop commission if it is notably low is that it may indicate dealing with a difficult person (seller or agent). But that being said wouldn’t impact showing or making an offer on that property.

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