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The great fee debate - Are you on a real deal or a fake deal?

Posted On : May-20-2009 | seen (604) times | Article Word Count : 1133 |

Many real estate salespeople today are lured by the proverbial ‘dangling carrot’ and accept the offer of a bigger commission structure only to find they go broke trying to maintain the outgoing expenses to run their business.
“Today, being a professional salesperson is just that – sell homes and move on. Running a business where you have all the costs is running a business.” (Lee Woodward, CEO Real Estate Academy). In other words, the two should not be confused.

If there were an award for the most controversial and widely debated topic in real estate today, that award would arguably go to the topic of pay structures in this industry.

In an attempt to gain direction and understanding of this issue, a number of prominent industry leaders gathered together in one room recently at The Complete Leader Conference, hosted by renowned sales coach and business visionary, Lee Woodward. Lee was joined at the conference by a unique line-up of leadership professionals, who, over two days, tackled head-on, a number of crucial issues facing real estate industry leaders today. In this way, it wasn’t so much about being given the answers, but more an open forum where participants were encouraged to contribute and be open to a variety of views on many thought-provoking leadership issues.

Extensive research was undertaken prior to the conference in order to develop an interactive survey that formed a key part of the day. The purpose of the survey was to anonymously extract information about the delegates as a broad representative sample of our industry leaders. The findings of the survey highlighted that, in terms of pay structures, the average commission of a salesperson stands at 41 – 43%. Despite the average though and, as anticipated, pay structures proved to be a topic of great variance in opinion and controversy. It provoked much discussion and debate amongst conference participants and our panel of speakers:

Lee Salce (Phillip Webb Real Estate)

Anthony Toop (Toop & Toop Real Estate)

Mark McCleod (Ray White)

Peter Mumford (McGrath)

It was certainly clear from our audience response that the majority share an annoyance that attempts are made regularly by other agencies to lure their salespeople with offers of ridiculously high percentages. The fact of the matter is this – these are not representative of a real deal as anyone who is offered in excess of 60% is provided with no support. They have to pay for everything from paper and ink to all marketing and prospecting tools. At 41 – 43%, a salesperson is provided with the necessary infrastructure to get on with the job of selling homes. Anything above this and they are nothing more than a contractor to a business who pays for their own office space.

As Lee Woodward pointed out, “don’t be fooled by these massive commissions being offered. You have to ask yourself - is this the real deal or is it a fake deal because 100% of nothing is nothing.”

Other interesting views on the issue of pay structures are more aligned with people and performance matters such as culture, leadership and support.

It is interesting to note that in our research, those leaders who rated their workplace moral as high also had the best staff retention levels despite offering average commission structures.

People and performance expert and Director of RealChange, Sadhana Smiles, said there is a misconception that salary is the number one reason for staying in a job, particularly in real estate. Research has shown however that people choose to stay for other reasons.

According to Sadhana, people today want security, support, recognition, opportunities, culture and lifestyle. Price, product and service are no longer the key points of difference because everyone’s offering those.

In another survey, conducted by Manpower, Generation Y employees (under the age of 25) were asked to rate, in order of importance, the elements that were important to them in a job. The results were as follows:



3.Management style




When asked if there should be the same deal for each salesperson, Sadhana’s response was a definite “YES”. She qualifies this view by saying that people inevitably talk amongst themselves and one of the standards she feels you must have to avoid discontentment is your pay structure.If questioned by an employee on this, Sadhana suggested the following response:

“As a business owner, I am not prepared to change my business standards, however we can offer: (list other benefits of working with you, such as lifestyle, fuel cards, area exclusivity, your own database, health fund contributions)”.

Sadhana’s views are shared by Bradley Brown, CEO of the multi award-winning Fletchers in Victoria and a contributor at the conference by recording a double audio CD, Power of People, a copy of which was provided to all participants. On the audio, Bradley shares his views on many leadership issues, including pay structures, which he said are the same across the board at Fletchers. Operating on a sliding scale for commissions, every staff member also has the opportunity to participate in a bonus scheme whereby if an annual target is met, the staff member is rewarded with travel, an incentive that is regarded very highly in his organisation.

According to Bradley, “remuneration is far beyond just a pay packet”. He is finding that his people don’t want the higher commissions without the support. “It is the complete package they are after”.

All too often principals are held to ransom by their top salespeople. It is vital not to have ‘all your eggs in one basket’. You have to ask yourself the question - what would happen if they leave you?

From an outsider’s perspective, one thing that was clear from this topic was that there isn’t one simple answer to the issue of pay structures. In my opinion, there clearly needs to be more focus on profit to the business and less on an individual’s pay structure. It’s also about culture, training, career path and where the organisation is heading as a whole. Keeping it simple and making it transparent also seems to make most sense. Perhaps some work needs to be done in ascertaining the actual desk fee for an agent. How much does it really cost to have a salesperson? It is only when you have that answer that you can really determine how much that salesperson needs to bring into the business for a return on the investment.

To summarise the findings of the great fee debate at The Complete Leader Conference, it was concluded that anywhere between 40 and 43% would be an appropriate commission for a real estate salesperson, provided adequate support, infrastructure and opportunities are made available.

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