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Your Value As A Real Estate Agent Under Fire: What Are You Worth?

Amidst perpetual controversy over decreasing commissions, many consumers question an agent’s worth. Hobbs/Herder tackles this complicated subject and provides you with the solutions.

Do you have any idea what people are saying about you? Do you?

Let me tell you this (and please, don’t shoot the messenger): it’s not good. The value of a real estate agent’s services is seriously being questioned among the general public. This is nothing new. You know the story. Don’t you find yourself on the defensive all the time? Don’t you get irate when the public’s perception is that you, the agent, are just there at the end of the sale with your hand out for your share? Do you find yourself trying to explain all the money and time you invest on listings or buyers, only to have the bottom fall out and you get paid NOTHING? Of course you do. It’s a topic of discussion that will not go away, in fact, you can expect it to heat up as more and more consumers use the Web to shop, compare, search, etc.

On one side of the argument, you have agents defending their commission fees as justified and blaming discount brokerages for eroding commissions. On the other were consumers railing against paying six percent regardless of the price of a home, arguing that agents’ pay structure is disproportionate to the amount of work done. For instance, why does the sale of a $500,000 home justify twice the income as that of a home that sells for $250,000?

I can see you now, chomping at the bit to provide an answer. But here’s the problem: It’s not me you need to plead your case to. It’s the public. Now here’s the other problem: Pleading your case is too late. At that point you’re simply trying to overcome objections. That’s why you have to take a proactive stance and constantly demonstrate your value. In this article, I’m going to show you how to do just that.

Commissions Under Siege

Before we get to the solutions, however, I think it’s important for you as agents to understand the problem. You need to step out of your shell and look at the issue from the consumer’s perspective. Because the truth of the matter is that you are the ones responsible for this debate. When a consumer searches on the Web using Zillow, Trulia and the flavor of the month real estate site, or less and less, picks up a Homes & Land, Harmon Homes or whatever local real estate publication you have in your neck of the woods, what do they see? Page after page, ad after ad, of agents doing the same exact things, in essence, telling the consumer that you’re all the same. What else are they supposed to think? After all, you all market houses in about the same way, you advertise in the same publications and you fill out the same amount of paperwork, regardless of a home’s sale price.

By doing so, you make yourself an apparent commodity. Pork bellies are pork bellies, and when you find yourself commoditized like a pork belly, price becomes the only determining factor for the consumer. So while agents will complain and say things like, “People don’t understand all the things we do,” you’ve got no one but yourself (as an industry) to blame. Agents are not You’re fueling the very fire you wish to extinguish, like you’ve got a can of gasoline in one hand and a water hose in the other. Whose responsibility is it to establish and attach value to your services? In my book, there’s only one answer to that question: It’s yours!

What’s Your Worth?

So where do you go from here? Back to one of the most basic principles of marketing: perceived value. Remember, perception is reality. Agents often want to argue the reality of all the legwork involved in a sale. That doesn’t matter. Think back to the perception we discussed in the paragraphs above. That’s what’s important here.

Look at any product out there, be it a car, laundry detergent or running shoes. Arguably, every product does what we need it to do, so why would anyone pay more for a pair of Nikes over a pair of no-name sneakers? Or purchase Tide instead of the generic store brand when both are going to clean your clothes? What are these products doing that makes them worth more? It’s all about how people perceive their value. And the pressure is on you to demonstrate your own value and let your customers know exactly what your services, expertise and knowledge are worth.

The typical agent response at this point goes something like this: “But I do tell my clients everything I do for them. I explain it all in my listing presentation.” Okay, but does Nike wait until you walk into the store to justify a $150 price tag on a pair of running shoes? Of course not. In fact, they’ve established the value of their product long before you even consider buying your next pair of shoes. So, how do they do that? On to…

Branding 101

As anyone who’s ever attended Greg Herder’s 3-day Marketing Mastery Seminar knows, building your brand is the lifeblood of your business. Your goal is to own a piece of your customer’s mind so people think of you as their agent before they even need one.

Remember, people prefer to work with people they like. And if you’re able to connect with them on a personal level, they will trust you, feel more comfortable with you, and the percentage of commission you charge will rarely ever come into question. To take this a step further, if you brand yourself within a niche – as, say, the “Condo King” or the waterfront specialist – you are offering your customers even greater value with more specialized expertise. Think of it in terms of the difference between a general practitioner and a cardiac surgeon: People expect a higher level of knowledge and expertise, but they also expect to pay more for it. How much do you grind your average cardiac surgeon on their fees? People are willing and happy to pay more for a service when they perceive real expertise.

As the market is building back up and we (patiently) wait for that elusive inventory to start coming on the market, those homeowners who were looking for the cheap answer will become more conscious of finding an agent who instills confidence. Your brand communicates that and the frequency with which I see your branded message will speak to people and heavily influence their decisions and their willingness to pay you what you deserve.

Quite simply, branding differentiates you from that vast wasteland of typical real estate agents and makes people perceive you in a different light. That differentiation is what makes you stand out and builds value. So now the question becomes how are you different than the competition and what are you doing to communicate that? If you don’t have answers to those questions, we need to talk. Otherwise, you are destined for eternal mediocrity (or worse, with the cooling markets being felt throughout the nation).

Reinforcing Your Value Throughout a Transaction
The task of building perceived value is not limited only to branding. Your servicing plays a big part in reinforcing your value throughout the course of a transaction. And when it comes to servicing, everything depends on establishing expectations in the client’s mind. Typically, agents do not do a good job of communicating all the things they are doing for a client once the client has signed a contract. Once again, perception reigns supreme, so what is the client’s perception? Of course, if they don’t hear anything from you, they’re going to assume the worst – you must be doing … nothing.

When your clients understand the process and the amount of work that’s involved, they value your service and expertise that much more and won’t think twice about compensating you for it. Reinforcing your value requires having some sort of system in place that allows you to communicate with your customers on a consistent basis. For example, you should be familiar with Hobbs/Herder’s listing service program that allows agents to be more proactive in showing customers exactly what they’re doing to market their home. Not only does it take the guesswork out of the listing process for your customers, it consistently follows-up with them and demonstrates your professionalism and level of commitment to their success.

It’s Your Choice
I think I’ve made a pretty strong case for the importance of branding and setting and exceeding your clients’ expectations when it comes to preserving and building an agent’s value in the marketplace. I hope you take this seriously because let me tell you this – if the industry as a whole doesn’t make a change, the consumer discontent is not going away. And there’s nothing that says that your commissions are protected and locked in at six percent. For instance, look at the popular commission structure used in Canada – agents receive seven percent on the first $100,000 but only three percent for the remainder of a sales price above $100,000. Under that system, you’d have to sell three $500,000 properties to earn the same amount you do for two at that price at the standard six-percent commission.

The moral here is that if you want to preserve your current pay scale and would like people to feel good about paying you instead of nickel and diming you on every tenth of a percentage, it’s up to you to do something about it. It’s time to wrestle back those ugly perceptions and to improve the reputation of the industry. That will only happen when you start treating your career like a business, building your brand, and increasing the level of professionalism throughout the industry.

If you want to learn more about building a brand for yourself and standing out from all the competing agents fighting for listings in a tight inventory, call Aleks Bugarski at 1-800-999-6090, Ext 599, or email Aleks.