When is the last time you had a pay raise? If you’re like most agents it’s been a while. I was talking to an agent just the other day and we were discussing increasing our incomes and this agent seemed to be thinking about her income being something out of her control. Here is what I mean.
If you ask most agents what they would need to do to make more money, they will almost universally give you the same answer — sell more houses. In other words, increase the number of transactions. More customers. And unfortunately, for most of them, good luck with that. It is what it is.
The average number of transactions per year has been steadily sliding for over a decade and most agents today see that as just a fact of life. Although I believe that doing more transactions is something entirely in your control, that is not my purpose in this article so I’ll save that for another day.
But there is a second way of increasing your income that most agents completely overlook. That is increasing the average dollar amount of your transactions. Let’s say that you closed one transaction per month last year, and the average sale price was $200,000 and you made 3% commission on average. That means that you averaged $6,000 for each of your 12 transactions or $72,000 for the year.
Now suppose you increased your average commission to $7,000 and continued to close 12 transactions this year. You just gave yourself a raise of $12,000 or a 17% raise without doing any more transactions. “Well, duh! That’s easier said than done, Matt. How exactly do you propose I do that?!”
Funny you should ask. Actually, if you think about it, there are two ways to do it. Increase your average commission and/or increase your average sale price. And both are entirely in your control. Let’s talk about increasing your commission rate first, since it is the most difficult.
The single best way I know of to increase your commission rate is to change your listing to selling ratio. Why? Because as a listing agent you have control of your commission rate. Working with buyers you are generally at the mercy of the listing agent and what they are offering.
Of course you could set a minimum and tell your buyers that any shortfall they will have to make up, but good luck with that conversation. You might even say that you will try to select properties where the seller is paying enough to cover your rate, but again, that is a tough sell.
But if you use my Ultimate Listing Presentation, you will likely be giving yourself a huge raise without doing any more work. I listed 119 years in my first full year in real estate, all at 8% or more. Did they all sell? No. But many did, and when they did, I got paid a third more than an agent listing at only 6% commission.
So, in other words, by changing your listing to selling mix and using an approach like mine you can control the average commission rate you receive and that will raise your income without changing anything else. It might also give you some more free time on the weekends.
Here’s the other way of increasing your income: Increase your average sale price. The reason that most agents are unable to do that is because they receive nearly all of their business from their sphere of influence. And your sphere of influence is likely very similar to you, demographically, and that means that the average purchase price is more or less fixed. You can’t control it.
But if you go outside your sphere of influence to generate business — not throwing away your SOI business, but adding to it — you can easily control your average sale price. The simplest way to do that is by marketing to where the greatest concentration of business is today: the internet.
Imagine supplementing your SOI business with a steady stream of online shoppers of every possible demographic. Most agents who have an effective online presence are capturing 2-3 new inbound leads every day. Some will be the demographic they want to work with while other won’t be. Easy enough.
Work the ones that fit your target demographic, and refer the others to a new agent in your office and take a nice referral fee for doing nothing. That can be your lunch and gas fund. Or your shoes and pocketbook fund (I’m obviously talking to some of you ladies now!) Or your “whatever” fund.
Not only can you easily find more listing leads and control the commission rate you receive on a transaction, but you can also pick and choose the purchase price range of your clients and refer out the ones that don’t fit your target demographic for a nice little bonus. That’s exactly what I did.
When I first invented my LCM technology, and I invented it for my own use, I picked and chose who I worked with and referred out the rest. I focused exclusively on listing where I could control the commission, and only worked with buyers who fit my target.
But it worked so well at producing low-cost leads — literally hundreds every month — that I was able to build and feed a team that eventually grew to 12 agents. Before long our team was so big we outgrew the Century 21 office where we all worked and had to start our own company. But I am not one to turn away business.
So I encourage you to give yourself a raise this year. Not just a small raise, but a big one! After all, you deserve it. Take control of your commission rate, and take control of your average sale price and you could easily give yourself a fat raise without working any harder — just by working smarter.
And if you need some help getting some low-cost leads from the biggest of all lead sources — the internet — check out my Ultimate Website. It is the very same technology I used to grow my practice back in the day, but now it’s much better. Will it work for you? Let’s put it this way: I’ve never once heard the complaint that it didn’t work to generate lots of low-cost business.
You may decide that you’re not up for learning the art of working with internet buyers or sellers, but you won’t fail because you didn’t have opportunities. We’ll hold your hand and get your leads coming in. You’ll have to take it from there. We can’t sell the houses for you. But we can help you generate the opportunities. Take the 5-part tour of my Ultimate Website here.