See Part I of this two part series here.

As they say out West, there's frustration in them thar hills…People seem to feel that the rise in commission-cutting is the result of four main issues; increases in house prices, the decline in the use of the agency relationship, agent's skill level in presenting commission and the seller's ability to do it themselves on the Internet.

Tom Hathaway, President of Buyer's Agent, Inc., a real estate franchise providing exclusive buyer brokerage, feels that the decline in the value of agency has hurt the industry immeasurably. “The consumer simply does not understand the importance of having true real estate agency representation in the transaction. Our industry has worked hard NOT to educate the consumer about the advantages of being truly represented. As a result, consumers think they can do almost every part of the home buying and selling job for themselves, as well as a real estate licensee can do it, and in many cases they believe they can do it better.”

Hats off to Mr. Hathaway for wanting more consumer education. It is well needed. I am awaiting the day that there is some kind of a class-action suit by the clients of certain discounters who offer tiered services for different commission levels. After speaking to literally hundreds of agents about conversations they have had with present or past clients of those discounters, it is clear to me that those clients did not understand what they were or were not getting as services to sell their homes. There needs to be greater care on the part of those companies in presenting their menu of services to potential clients. That many confused people demonstrate a problem with the communicator, not the client.

The issue of home prices and commissions is an interesting one. Some people feel that since the prices of homes have escalated so much over the past few years, a lesser commission is just fine. The income of the agent remains the same and everything is in balance in real estate land…Not…

Looking at profitability within the real estate business strictly based on the rise in real estate prices is to ignore the realities of profitability in the industry in general. Having recently read Swanepoel and Tuccillo's white paper, Real Estate Confronts Profitability it is clear to me that the issue of agent/broker/company profitability is complicated and multi-faceted. If it were as simple as hedging all of our bets on real estate prices continuing to increase enough to sustain profitability and thus our existence, I suspect that we would all be breathing a bit easier.

The fact is that profitability on one transaction was between $44 and $132 on an average sales price of $151,800 in 2001 according to Compensation Master CEO David Cocks. That is a bit scary, wouldn't you agree? Thus there are new models of business emerging to allow companies to stay afloat and remain profitable through other income streams.

One reader made the point that he could make a handsome income as long as his company stayed small and kept the overhead down. Perhaps for the moment that is true, but I fear that with the consumers demanding ever more services (the least of which being assistance with actually locating homes for sale) small companies are and will continue to have difficulty keeping up with offering the necessary ancillary services requested and offered by their larger competitors. It is unwise to put all of one's eggs into one basket when looking to protect commissions and profits.

From many consumers' perspectives the real estate agent is less critical to the transaction than in days past. The access to information on the Internet (we no longer are the gate keepers of information) has lead them to feel that much of the process can be self-generated. The traditional model is under attack. Until we fully surrender the role of information gatekeeper and accept that the most important parts that we play are that of information providers /process assistants/and ancillary service facilitators, the sooner we will be open to see the vast opportunities that are available to assist our clients. All I need to do is to look in the mirror to I know that we are an aging group of people. The average age of a Realtor® today is around 53. Thank heavens new blood is entering this business daily. I have the great privilege of training these entrants, and I can tell you first hand that we are blessed. These business-savvy people ensure the continuation of an important business.

Perhaps the agent who has been doing business for many years needs to recommit to learning new ways to present his/her services to the consumer, get a complete understanding of unbundling of services and be sure that they are grade “A” when it comes to positioning their company's services. In so doing, they are perfecting the value-added approach to selling. Consumers hate to be sold, but they love to buy. We need to help them do what they want to do.

Published: July 10, 2003

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Marylyn B. Schwartz, CSP, is a noted expert in real estate and corporate sales training, team development, customer care and diversity issues. She is president of TEAMWEAVERS and was a trainer for the Floyd Wickman Courses©, Sweathogs® program for over five years. Marylyn is also an author and Business/Life Coach. Contact her at , or visit her website at MarylynBSchwartz.com.