You Work Hard for the Money

May 1, 1996

If you run into consumers who aren't sure what you do for your money, show them just how hard you work by breaking down your cost of doing business. Two salespeople did just that for us to prove that each transaction is both money zapping and time intensive.

The Anna King Philosophy of Honesty and Integrity

For Anna King, of ERA®--King Real Estate, Anniston, Ala., integrity means telling it like it is. But she can tell you better in her own words:

I never try to downplay the money I make---my commission is probably about 1 percent higher than that of other salespeople in town. People want to be around successful people. They don't resent your being successful as much as they don't understand how you got there. If you can make them understand what you'll do for them, they're more apt to go with you than with someone else.

So at the listing appointment, I tell them I'm not in the office that much and it'll be difficult to get in touch with me because I'm out selling their house. If they really need me, they can contact me on my car phone. I also tell them what I do for my clients, such as going to every bank in town every morning to find deals and good rates. I go to area schools twice a year to have lunch with the principals. And I probably conduct about 30 school tours a year, where I introduce buyers to principals.

I let them know that if they think they can sell their property by themselves, they should try it and then call me. I tell people, "I don't sell housesif you don't know the kitchen is the kitchen, you don't need to buy a house---I sell financing and service."

When sellers interview me, they're probably also interviewing three other salespeople. I never ask who the others are or mention another company. And that throws sellers off. They want to know why I don't ask. But I tell them I'm not competing against those salespeople. I tell them what I do, and then it's their decision to make. If they choose someone else, it's based on the facts they have.

I've never lost a listing.

King's Commission Breakdown

If King gets a 7 percent commission on a $100,000 co-op sale, her company and the cobroker get $3,500 each. She gets 60 percent or $2,100. But that's before expenses.**

WHERE ANNA'S MONEY GOES

Expenses per transaction assuming a $2,100 commission

Personal Assistant   264.00
Advertising   93.00
Car Payment   71.00
Car Phone (she has two)   57.00
Personal promotion/direct mail   36.00
Closing gifts   29.00
Business entertainment   21.00
Franchise transaction fee   16.00
Car maintenance   11.00
Office phone (she pays long distance)   11.00
Education   7.00
Computer maintenance/services
(she purchased her own equipment)
  7.00
Career apparel   7.00
MLS fees   6.00
Association dues   6.00
E & O insurance (her portion)   2.00
Total   $644.00
Income before taxes    
(Commission -- expens   $1,456.00*

*This figure doesn't factor in self-employment and income tax. King also points out that she sells more than half of her own listings. With a 60/40 split on a $7,000 commission, her income before expenses and taxes is $4,200. King's co-op and other listings are on the market an average of 110 days.

Michele K. Smith: Actions Demonstrate Integrity, Ethics

Smith is a salesperson with Gloria Smith Real Estate Inc., St. Louis:

I haven't experienced a perception problem because people come to our company knowing they'll be treated fairly. I explain what I do and my commission rate, and I provide an overview of the company, myself, and my association activities.

I work with minorities. And I spend a lot of time explaining the process because many customers are first-time buyers. Sometimes I even have to help them open a bank account. I tell prospects that buying a house is a big responsibility. We need to be pulling in the same direction. And they need to be forthright with me. If something isn't clear to them, such as the lending process, I can try to help.

My mom always told me that some people may not be able to buy a house from you today, but maybe they will in 14 months. So show them what they need to do to come back in 14 months to buy. Its a matter of helping them make decisions, such as how to choose a title company, or asking them whether they can get a loan through their company's credit union. If they trust you, they'll rely on you.

All people have to feel you're concerned about what they're going through. Even when drug addicts come into my office asking for money, I try to make them, like everyone else, feel welcome.

Smith's Commission Breakdown

Say Smith closes an $80,000 residential sale---typical in her market. If she gets a 7 percent commission on a co-op listing, that $5,600 is divided as follows: the selling salesperson's company gets 2.7 percent, and Smith's company gets 4.3 percent of the sales price, or $3,440. Smith gets 100 percent of that, about 90 percent of which she puts back into the family-owned company. Check out her expenses in "Where Michele's Money Goes."**

Typical salespeople at Smith's company might not have a $200 cellular phone bill per transaction. But they pay 60 percent of their commission to the broker. They end up with about $1,376 per transaction before expenses and taxes.

WHERE MICHELE'S MONEY GOES

Expenses per transaction assuming a $3,440 commission

Advertising $600.00
Cellular phone 200.00
Car maintenance 75.00
MLS fees 20.00
Time spent per transaction @ $25/hour
Counseling and stroking clients or customers
375.00
Association dues 5.75
Total $900.75
   
With lender 125.00
With title company 50.00
With building inspectors 37.50
With appraiser 25.00
Total $612.50
Grand Total $1,513.25
Income before taxes  
(Commission -- expenses) $1,926.75

*This figure doesn't factor in self-employment and income tax. Smith's co-op listings are on the market on average of 90 days.

**NAR's legal staff points out that there isn't a standard commission rate and split for the industry. By law, all commissions are negotiable.

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