It was a gorgeous evening. The phone was off, my favourite CD playing and the bbq was primed. I’d been looking forward to some quiet time. It helps me sort the wood from the trees. On the way home I’d even called into the butcher and treated myself to a piece of his best fillet steak. The moment it hit the grill, there was a knock at the door.

Not expecting visitors, I figured it was someone wanting to enlighten me, or sell me on something… (Some would see those as one in the same). Anyway, for me, steak must be cooked to perfection. Determined to get back to it, I opened the door with a prepared response…

Turns out it was Pete the plumber. He happened to be in my street, and was wondering if I needed any plumbing work done?

Doesn’t the universe work in mysterious ways? Can’t say I had been looking forward to clearing that choked sewer. The smell alone was motivation enough to get someone else involved. And lo and behold… here… standing right in front of me was a suitably qualified specialist, offering to solve my problem.

“Pete… thank you for asking. As a matter of fact, there is something you can do for me. Head on down the drive and have a look, I’ll be with you in a minute.”

He spent about one hour on the job before bidding me farewell. Life was good. Until the invoice arrived: Parts and labour (FIVE hours work).

What? There must be some mistake?

You’ll never guess what he said when I gave him a call…

“Five hours… Yes that’s right Sir… I had to knock on doors for two hours before I found you. Plus I did two hours work for your neighbour last month, who chose not to pay me. So I also had to add that to your bill.”

Huh? I don’t know about you, but that’s nuts. I mean expecting me to pay for his time knocking on doors? Let alone the work he did for the neighbour? I think not.

Now, if you haven’t already guessed, that was just a silly story. Well, the bit about the plumber anyway. I certainly enjoy a good steak, and on the whole would prefer salespeople not to knock on my door, uninvited.

But as silly as it may seem, that’s exactly what’s happening in real estate.

It’s estimated that salespeople spend up to 64% of their time and effort looking for people who want to sell their property. In sales land that’s called ‘prospecting’. In fact Alistair Helm (Industry Commentator) once pointed out:

“The productive time spent on behalf of their clients in facilitating the sale of a house represents less than 25% of their working week. Yet their income from sellers supports their full working week.”

Let that sink in for a moment.

Basically, the commission on your sale, needs to be high enough to support the industry, to spend the majority of their effort, finding you.

This why the real estate industry, as we know it, puts a price on winning your listing.

Lets say I’m a real estate agent in Timbuktu. I’ve just done a great job helping you sell your home, and now you also want to sell your investment property in Christchurch… “I can put you onto a great agent up there, I’ll get them to give you a call”.

You see here’s the secret: as an agent, our industry will pay me a ‘referral fee’ (for a genuine seller lead). After all, the salesperson I’m referring you to in Christchurch no longer needs to invest any time or effort hunting you. The going rate is 15 to 25% of the commission payable on your sale. (On a $450,000 home, that’s anywhere from $2,500 – $4,500).

You may not be aware but there’s even outfits now offering a “FREE” service – to vet and help you select the best local real estate agent. Giving you independent advice to ensure you as a seller are protected. Which is odd in itself. I mean, why is there a market for such services in the first place? That aside, they are not actually free. They’re selling you, as a lead, to a local agent. I wonder if they’re really sending me to the best, or the one who’ll pay them the most?

Which ever way you look at this, it’s clear the traditional industry puts a value on finding you.

Now to my way of thinking, if they’ll pay other agents 25% of your commission – for getting your listing – then shouldn’t they offer you the same deal?

So go on. Don’t put up it with it any more. Next time you want to sell, have that conversation with the agents you are interviewing. I’d love to hear how it goes.

Before I sign off, I can sense some of you thinking…

What about the work the plumber did for the neighbour. How’s that like real estate?

You know how commissions are traditionally ‘contingent’. Which means ‘dependant’ upon you actually selling. If your neighbour is unrealistic, wallows on the market and ultimately chooses not to accept the best offers on the table… then the agency loses all that time, effort and money working on their behalf.

So it follows, the fees for the clients who do accept the market, also need to be high enough to cover the losses from those who don’t. It’s common sense really. Any business that gives away products or services to some customers – must recover it back from others. As my dad use to say: There’s no such thing as a free lunch. Somebody is paying.

Knowing all this, is it really any wonder why typical real estate commissions seem so unfair?

If you’re interested in a simple solution… A smarter and fairer model. Were you’re not paying for us to find you, and you’re certainly not paying for any work done for other clients. Which is why, on average, it’s leaving 36% of traditional commissions in your pocket – while us as agents are also better off.  If that sounds like something you’d like to know more about, then feel free to request a copy of:

“How To Keep The Most From The Sale Of Your Property.”

Is gives you three steps, that will help you end up with more in your hand.

Happy selling. May you bank the most possible.

PS. If you’re a real estate agent, you either want to strangle me, or you’re also disillusioned with how our industry works and would love to be a part of the solution. If it’s the latter  – click here.