Real Estate Salesperson or Real Estate Advisor – Which One?

Matt Dollinger  at The You Factor wrote a post asking an important question?  Are you a real estate salesperson, or a real estate advisor?  If you don’t follow Matt Dollinger, I would strongly suggest bookmarking his site or following him on Twitter at @mattdollinger.

Matt poses the following question:

I have asked this question hundreds of times to hundreds of agents across the Nation. And where the answer is variably different, in many cases it is still the same.

“I am here to advise my clients to make an informed, educated and advised decision that suits their budget, current and future needs.”

I take this answer at face value… call me a cynic, call me jaded, but there’s a 600 lb gorilla in the room called “commission” that contradicts this statement for many.

I don’t think the answer that Matt gets is unusual or unexpected.  Most real estate people think they have the Clients best interests at heart – even when they don’t.  And, as in any profession, there are the bad apples that don’t have any concern for the Client, only there next sale and resulting commission.

Many of these agents contributed to many people buying over thier head with the expectation of future equity gains.  They ill advised their Clients to buy with bad loans, bad homes, and did not have their interests first.

On Matt’s post, there is an excellent video regarding a story of one of those unfortunate Clients.  Take a few moments and view the human side of choosing the wrong agent.

Matt then asks the question, can a real estate person be an advisor when he or she only benefits from a sale?

- I am compensated on the volume of transactions that “close”

- My “split”, or % of the gross commission awarded to me is determined by my production, or closed volume (i.e. the more I close the higher the % of gross commission I keep).

- So in order to pay MY mortgage, car payment, grocery bills, etc. I must actually CLOSE transactions.

While I cannot speak for my colleagues, I can certainly speak of my personal situation and goals for my Clients, prospects, and myself.  For more visit my Clients Bill of Rights or my strong belief in not doing Dual Agency.

First off, I am a licensed Broker in the State of California.  It is surprising that agents don’t take a bit more effort and gain a higher standard with a Real Estate Broker License.  I have never considered myself a salesperson – but having sales abilities is the reality of the business – don’t kid yourself.

Second, I am compensated on the volumne of transaction that I close.  You have all heard the term “Top Producer”, Number One Agent, and Top Snob – 1% in Nation in Sales.  I have always wondered how there can be so many #1 agents, but that’s another post or two.

This focus on agent earnings is counterproductive to client services.  I will give you that many “Top Producing” agents know how to get the job done on a volume level – but real estate is a complicated transaction that takes focus, experience and time.  I have never been, nor do I choose to be a volume agent – I submit to be a trusted advisor; your business has to be more focused in allowing time to make sure each Client gets the representation and attention they need.  Many times Top Producing agents will have teams of newer, less experienced agents advising Clients – my Clients only speak to me.

I hate salespeople! Maybe too broad a statement, I hate pushy, poorly trained salespeople – that’s better.  When I am thinking of making a major purchase, I will research the item on line, but also try to speak to a real expert in a store to show me the benefits and drawbacks of the item.  A knowledgeable salesperson can make a huge difference in assisting me in that decision if they have my interests at heart.

I own RealtyV2.  My commission split is the same for each transaction.  I don’t have to close 25 deals a year to get a 90% commission split with my Broker.  While many newer agents have to work up from a 50% split forcing them to constantly be looking for the next transaction/commission.  The old model is not Client Centric.

Third,  Yes, I make my living from selling real estate – if I don’t sell I don’t eat. With that said I have advised Clients on many occasions that a purchase was not in their best interests, that to sell a home in a particular market was not wise, or to take that risky teaser rate loan was risky, if not crazy.

While I may be turning away income, it is the only way you move from salesperson to advisor.  Running a business in this manner will come back three fold as past Clients recognize that you have their best interests at heart.  Rather than leave a bunch of ill advised real estate clients in my wake, I prefer to have fewer more Clients making wise real estate investments.  They make for happy Clients.

Besides, ill advising Clients is counter productive to your long term career, why would anyone use you again or refer you to family and friends. STUPID.

Another must read is Jay Thompson A.K.A. The Phoenix Real Estate Guy.  He recently wrote a post “I am not a Salesman.”

If you could walk into most real estate brokerages today and look behind the scenes, you’d see white-boards showing listings and sales under contract. You’d see a wall full of “million dollar producer” awards, and “diamond awards” and other such nonsense. You’d see rah-rah sales meetings with brokers pontificating about ways to get more “leads” (a word I personally despise) and methods to sell sell sell.

It makes me want to puke.

Back to Matt’s post and what he feels makes a true real estate advisor…

1. To be a true “advisor” and recommend AGAINST buying a home if it does not fit their budget, lifestyle, or current situation means that I am not going to make any money.

2. To be a true “advisor” and recommend that someone spend less money than more money on a home means that I, in turn, make less money from the transaction.

3. To be a true “advisor” and recommend that someone “hold off” on selling a home at the moment due to market conditions, net return/loss, etc. means that I am not going to make any money.

4. To be a true “advisor” and recommend someone not purchase/sell a home at this time means that I have less volume “closed” working towards an advancement in commission split.

I believe that this is one of the glaring contradictions in the current real estate brokerage model, and one that I don’t have a concrete opinion on how to fix. But that’s not what this post is about… There is raging online commentary on the commission/brokerage model of the future across the web, and this post isn’t intended to enter this arena.

Amen, and can I get a hallelujah!

Looking at my word count I am now at 1077 and could go on for several thousand more.  In the interest of keeping you awake I am going to sum of what I think are the two takeaways from Matt’s fantastic post.

1. To Consumers – you deserve the best. You deserve an advisor. This is the largest purchase you will probably ever make and $250,000 is still a quarter of a million dollars. Take your time and make an educated decision.

2. To Agents – strive to be or become a real estate advisor. Take your job as serious as it truly is and understand that you are in charge of their financial future. Don’t be good be great.

For those real estate consumers out there please select your agent carefully.  Don’t feed the bad ones (just encourages them) and don’t believe any real estate agent, including me, until you have spent some time with them and sense they have your best interests at heart.  This takes some time (You will know when) and is why I spend so much effort providing content so that potential Clients can get to know me before they ever pick up the phone.

Matt is right, you deserve it – there are some really great Advisors out there, and some really bad salespeople.  The cost is the same – the results are not.

And for my Agent friends, take Matt’s advice.  We are affecting peoples lives and advising them in one of the most dangerous markets in the history of American Real Estate.  While there are great opportunities in this market – see Lighter Side of the Dark Side – there are many schemes, scams, and charlatans out there to take Clients down the wrong path – to sell them rather than advise them.  Use your power for good, not evil, be the advisor.

For me and my house – it is Real Estate Advisor!

Thoughts or comments?