Knowing one’s worth is a cliche that is often tossed around in the real estate industry, especially when it comes to a conversation about commissions. Shortly after the iconic “I know my worth” statement is uttered it is almost assuredly followed by “I will not devalue myself.”
The one thing that is priceless in this world is time. Whether it’s Pink Floyd signing a song about it or branding genius Gary Vaynerchuk saying he would give up almost anything to get some back, a lot of wise people realize time is priceless.
So how is it possible that so many agents that know their worth and have a high value of their time never stop to actually put a value on their time? As a family man with two small children who always wants to play or do something with dad, the one thing that is most valuable to me is time.
What does it mean to truly value your time as an independent contractor?
How do real estate agents spend their time?
Shortly after the turn of the year into 2024 the Consumer Federation of America put out a study about the productivity of real estate agents and what it revealed was the average real estate agent did two deals last year and about three fourths of all agents did 5 deals or less.
Reading that study got me thinking, how are agents spending their time each day? How much time do they actually spend working? If you ask the typical agent they all say they are working 60 plus hour weeks but how is that possible?
So I did a study on real estate agents and how much time they spent to do a deal and the findings were the average agent spends 10 hours or less managing listings and 30 hours or more managing buyers.
The average agent said they would be very comfortable managing dozens of listings but could only manage a small number (about 4) buyers before they were completely out of evenings and weekends to show properties.
These are evenings and weekends that should be spent with family and friends. This also before the NAR/DOJ changes which makes buyers much more tedious.
How does the type of client affect your business?
If the 10 hours spent on a listing and 30 hours spent on a buyer are accurate (and no one has yet pushed back on this to me) that means you are three times as profitable on a listing as a buyer (.266% commission per hour spent on listings vs .088 per hour on average for a buyer).
Listings are also the golden goose that keeps on giving. Listings provide the opportunity to generate more listings, listings generate buyers, stable income, and all other positive things in real estate.
So in essence, one side of this business, which is listings, can scale almost infinitely with some help and doesn’t require all of your evenings and weekends and the other side of the business, buyers, doesn’t scale at all and requires tons of evenings and weekends and also has you “on call” to show properties on a never ending basis.
Why do we as agents ignore these facts? Why wouldn’t we value the two different clients very differently? And the most important question…..
Are listings undervalued or are buyers overvalued by the industry?
Which type of client do you prefer?
If given the opportunity to take a listing or a buyer at the same fee who in their right mind would take a buyer? More interesting question, would an agent be wiser to take 2 listings for 1.33% each or 1 buyer that would pay them 2.66%? What about 3 listings at an even lower fee vs 1 buyer?
What would generate more money for them long term? Which gives them more opportunity to generate future business? At what point does it stop making sense? Why on earth would someone pay a huge referral fee or spend money on buyer leads but refuse to charge less to get a listing lead easier?
For agents that love doing deals and staying busy but hate buying leads and cold calling is it such a crazy idea? When I speak to homeowners, lenders, title companies, entrepreneurs, friends, family, and virtually everyone else outside of the real estate industry they all get it and think it makes total sense.
Why is it then so controversial to rank and file agents and brokers to charge less or have a different fee structure for different things? After all these different things have different values to an agent long term, pay grossly different amounts per hour, and have a vastly different requirement of an agent’s time.
Final thoughts
An unwillingness to be open minded and think outside the box is what put the industry in this mess with the Department of Justice and is causing real pain for many in the industry. Doubling down on ignorance and a lack of innovation in your business model is not going to make that pain go away.
I’m not saying everyone needs to be a “discount agent” but if you truly don’t understand why they exist at this point it’s because your head is in the sand. The plaintiff in the Sitzer case recently opened up a very low fee brokerage called Landian which has everyone clutching their pearls.
Personally, I was not shocked at all because it was a horrible experience with an agent that got me into the industry, but rather than succumb to pressure and become that bad agent myself I chose a different path.
Many new paths will be chosen soon and that’s a good thing. Now might be a great time to question the one you are on yourself or at least not spend your days criticizing others for their path of choice.