Rob Hahn has written an extremely thought provoking piece on the role that broker commissions play in the pricing of real estate. It isn’t what I originally thought when I read the title- I was expecting a “commission is just a markup” but it wasn’t about that at all. It did get me to wonder aloud, however, if there is a seller out there that would, in exchange for no commission, retain a broker and then just pay billable hours until the house sold. 

I am in the field. Rob’s article is eye opening. If I were to charge $X per hour for my services, would the seller have the house sit out there speculating on a high price? Or would we skip months of messy rooms, denied showing requests, subjective speculation pricing and get serious? I think if they paid billable hours, the answer would be the latter.

Essentially, the commission I charge is categorized under the risk being proportional to the reward. Low risk, low reward. High risk, high reward. Which is why the broker fee line item in a transaction I broker is among the larger numbers. In forgoing the commission for billable hours, the seller essentially shares the risk. If the house sells fast, there is a huge savings. If it does not sell quickly, the seller could pay as much or more. Facing that reality, they would be far more likely to be proactive participants, keep the house clean, price realistically and accept all showings.

Less than motivated sellers often figure that they lose nothing if the broker fails to sell the home because commission is only paid at a closing (they actually do pay a hefty price in the form of a stale listing, but that is for another post). That explains overpriced listings, denied appointments and a host of other things that drive Realtors batty. 

If the seller shared the risk and traded commission for billable hours, overhead would plunge- less time on market, fewer hours devoted to pushing overpriced listings, far smaller marketing budgets, and a more streamlined process. The only caveat here is that you couldn’t go half and half with some listings on commission and others not, because you’d have the worst of both worlds- the commissioned listings would not sell and the hourly deals would have their profit eaten by the overhead of the stale stuff. 

Will sellers share the risk? Or, more likely, as much as they bristle at the line item of the commission, do they know it really is the price of they pay to have brokers roll the dice the way we do now? I believe in the power of market forces. An organically better idea would spread like wildfire if it truly had merit. Billable hours, while a great theory, will never work so long as the vast majority of sellers would see trading the commission for higher personal accountability as out of their comfort level. 

The company has grown over the years and in the first quarter of 2011 we’ll pass 20 salespersons and associate brokers. I am not an overt recruiter; our growth has been organic, but in looking at the good folks we’ve attracted I do see some patterns. Chiefly, we have drawn 2 types of people: new agents seeking strong leadership and mentoring, and experienced agents seeking an environment of independence and support. I am proud that my team is a group with good, honorable hearts. 

If you are considering a career in real estate, feel free to contact me. Better yet, contact one of our agents. They’ll tell you how it is here firsthand, and you can form your opinion from their experience. I admit to being biased. 

Real estate is not for everyone. It is commissioned sales. Just liking houses isn’t enough. You have to want to make something happen. But you also need the right environment. 

Here’s what we offer. 

• Training and mentoring. I have time for any agent who wants to learn, especially if they are the kind that acts on their knowledge. 
• Support with marketing. The best agent in the world will starve without clients, and we help develop clientele, through our joint efforts and also through spehere of influence. 
• A helping hand. I will partner with any agent on any possible deal or client relationship to reach the goal. Just ask my agents- when the going gets tough, I help them make the transaction happen. 
• Work directly with the broker-owner. You’ll get my cell number. OK, so everyone knows my cell number. You know what I mean. 
• Ann Faranda. The administrative goddess, and organizational backbone who handles details that my copious cloud of hot air does not. And she knows what al dente means. 

It is a well deserved fact that one of the knocks on real estate agents is that they don’t return phone calls. I have been there, & bought the picture they took of me walking in. Really, I have. 

It is a little discussed fact that some members of the public don’t have the same familiarity with voice mail that we have, and I’d like to give equal time to the other side of the issue. What prompts my little diatribe is a mumbling message that was left while I was visiting my son’s Pre-K 3 Valentine party today where I have no cell coverage. Someone, I don’t know who, left a garbled mumble about a new listing and no number. And of course they work for the CIA like most people it seems these days, so their number was blocked. 

I want to call them back. I just can’t. I have no name. I have no number. A few suggestions when you leave a message for one of us no good, lazy agents:

• Speak up. Low talkers don’t translate. I can’t hear you if you mumble in person and it is only worse over the phone. 
• Leave your number. It wouldn’t kill you to repeat it, either. You wouldn’t believe how many people leave their life story on my voice mail but forget to leave how I can call them back. 
• Enunciate. Was your name Ronald or Rhonda? You are in town for the week or have to catch a plane at 8 tonight? I couldn’t hear you over that jackhammer/crying baby/fog horn/rutting wildebeest in the background. 
• Less is more. I think it is great that you were attending a seminar around the corner at the church and saw the sign and wondered if the lot next door was part of this house and blah blah blah, but I kind of don’t care as much as I just need to know how I can reach you back. It’s like explaining a compound fracture to the doctor. Let’s re-set the bone and then we can trade ultimate Frisbee anecdotes. 
• I don’t have total recall. We spoke 6 months ago? Great! About what? Your first name isn’t exactly enough information! 
• Call back. If you don’t hear from me in a reasonable amount of time please give me the benefit of the doubt and call back again just in case one of use is a victim of human error. It is the civilized thing to do, especially if you didn’t leave your number the first time. 

I am no fan of open houses. I haven’t made a sale at one in a dog’s age (1998 if you really care), they are typically poorly attended, and I can think of better places to catch up on email and reading. Today, however, I hosted a really busy open, with 6 very friendly and engaging parties walking through. Nobody was a quick turnaround out the door, and 2 of the people mentioned they would first have to sell, which I view as a listing opportunity. 

If everything played out perfectly, I could get three new listings from today’s guests, sell another 2 homes, and maybe even sell the home I was holding open. 

So, we had quantity (six people) at today’s open house, and quality (all very friendly and engaged, 2 with homes to sell). I haven’t seen these kinds of results at an open in years and years. And the weather isn’t even very good!  

I view this as a strong indicator that the worst is behind us. I see pent up demand starting to purcolate, and if open houses can be a source for doing business again instead of a futile exercise to pacify a seller (and today’s open was actually my idea), good things are coming. 

I do what works. If open houses are going to be well attended this spring by interested people, then that is a huge change from the bored solitude-fests I have encountered the past few years since the market slowed. So, as long as I get results, I am going to continue to do them. 

Two quick things in the past 24 hours that made me feel just a tad old. One cute, one not so cute. 

Not so cute: One of my agents fired a client today (yes, we do that in some cases) because, frankly, they were too immature. Newlyweds, lots of good reasons to have hope for a good deal there, although unrealistic, which is forgivable, but disrespectful, which is not good at all. My associate broker is a consummate professional, took the high road at all times, was patient, and then spoke with me about a few things that were red flags. We decided it was best to ask them to find other representation. I can educate people on the market. I cannot educate people on how to act. Not surprisingly, their visceral reaction to being given free agency back only confirmed our suspicions. 

Maybe someday they’ll see their folly. Just saying that makes me sound like my dad. 

On the positive side, I also met this morning with a young couple to discuss the sale of their condo. Early on in our conversation it was clear that I’ve logged a few more laps around the block than they; relatively recent college graduates, even more recently married, and looking to sell the condo to move up to a single home with a yard. It’s really hard to believe that grown people could graduate college almost 20 years after I did! I sure don’t feel old enough to be their, um, uncle, but I am! 

This couple will be a pleasure. They get it, and I will enjoy helping them plan a good future home for their family once we sell now. 

The way younger people are so future-centric makes me think. The younger they are, the more they talk about the future and their plans. The older we get, unfortunately, the more we speak of the past.

Want to feel young? Focus on the future. 

Just in case you’re up late and licking your chops about the market change toward equilibrium I just blogged about, I did a comparision of the first 6 weeks of 2010 compared to the first 6 weeks this year. 

In 2010, the first 6 weeks had 377 closings for single family homes at a median sales price of $605,000.

In 2011, the first 6 weeks this year we have had 321 closings at a median sales price of $560,000. 

Should we panic? 

No, we shouldn’t panic. And we shouldn’t blame the weather, because anything that closed in January went under contract long before the severe winter hit. If anything, the weather will affect things next month. We just aren’t out of the woods yet. Six weeks is a valid sample and should not be dismissed as an anomaly, but we can make up that 56 sale deficit in the next 46 weeks. 

I’m not worried about the median price; Westchester values are so huge that a slight shift in the high dollar sector can skew things there. To me, the metric of progress is the number of closings. In 2005, for example, the first 6 weeks had 545 closings. In 2006, it was 477, and in 2007 we closed 489 in the same period. 

What I am encouraged about is the number of buyers I am seeing. Showings are way up, and even if they are mostly lookers, more showings equals more buyers. 

I modestly predict that by the end of 2011 we’ll surpass 2010’s numbers. However, we won’t pass 2010 until after at least mid year, because 2010’s numbers are skewed by the stimulus, which had that year start out stronger and end weakly.The distribution of demand was uneven because transactions went way down after it ended April 30. Look for a more  even distribution this year. And keep your fingers crossed that the economy is in a sustainable recovery. 

Upon occasion, I meet an agent for the first time and they look nothing like their picture on their website or card. Let’s face it…real estate agents are notorious for having absurdly old photos of themselves for way too long. It’s hard to tell someone that they look like the grandmother of the person on their marketing pieces, so for those of you out there that we’ve been too polite to say it to bluntly, here are a few indications that you might want to get a new photo of yourself. 

                          

• If you call to get a reprint and are told the glass plates broke. 
• The watermark is actually from, you know, water. 
• You recall the news of the day it was taken mentioned the Suez Canal, Neil Armstrong, or Watergate.
• You are wearing a small lapel pin of the Brooklyn Dodgers.
• When you meet an agent of the opposite sex in person they are far less flirtatious than they were on the phone. 
• When you meet an agent for the first time they do a double take. 
• When you see your own photo, you start to hum something from the Carpenters. 
• You have a rotary phone up to your ear.
• Your jacket is sky blue.
• There is something made of macrame behind you
• You have big hair.
• You distinctly remember driving home from the photographer in an AMC Gremlin.
• It was taken on film and scanned later. 

Seriously…update that photo! You aren’t fooling anyone! 

                        

I used to joke that if you needed my advice or to borrow money from me that you were doomed. That may still be so; we’ll have to see. One place to look on the advice side is Keller Williams Realty Group in Scarsdale, NY where team leader and Active Rainer Jennifer Maher took a chance on having me give a presentation to her office on creating an online presence.

We had a very good multi media session in their training room on social media, blogging, and online tools that went about an hour in change with a very enoyable, engaged group soaking up my, um, wisdom. We had a lot of laughs and covered quite a bit of what I consider valuable material on integrating a strong online presence for one’s real estate practice, including Facebook, Twitter, Blogging, and even leveraging big sites such as Zillow and Trulia.

Questions and answers followed, and after that Ms Maher, super agent Luis Fernandez and OP Jamal Hadi had a delicious lunch, which was my yummy recompense for sharing my, um, wisdom.

I enjoyed myself. Also present was Michael Brown, whom I closed a deal with in Ossining recently. I have to say that is gives me a smile to walk into a group of colleagues and see someone I am doing a deal with or have had a closing with recently.  Michael was front and center and participated. 

You might ask why I would give a presentation to a comepting office on what I do to attract business. I’ll tell you: Lunch- I mean, it is important to me that we as colleagues raise the bar together. Anyone who has ever picked up a listing sheet and frowned when they saw the listing agent knows what I mean. In our business, we cooperate with our competition (“coopatition”).  Building bridges, helping those with whom I am likely to close a deal with down the road, and being generous of spirit pay dividends.

And I also like Italian food. Did I say that out loud?