By Walter Sanford
Hiring a buyer’s assistant or buyer’s agent can be a large and expensive decision, with the duties of a buyer’s assistant varying as greatly as his compensation plans. So is it profitable to hire one?
A good buyer’s assistant or agent works the program for the acquisition of buyers, showing of buyers, writing of contracts, and all other duties relating to the same. For a buyer’s assistant/agent to effectively complete these items, he might require as much as 50 percent of the commission, and sometimes even a commission plus an hourly fee. Let’s look at what happens when you pay a buyer’s assistant 50 percent of the gross commission from a sale.
It’s your office and your systems that are most likely producing the buyer leads. This happens through your work, and it is translated in overhead. For most real estate agents, overhead is between 20 percent and 40 percent.
Let’s take 30 percent as a good average. When you add that 50 percent commission to your overhead, are you making more than 25 percent net profit? If you say, “It might be close,” shouldn’t you consider just referring the buyer out to an agent in your office for 35 percent and not adding another layer of personnel to manage? This is a personal decision that usually centers on the following questions:
• Can I refer for a high referral fee?
• Will that net me more proceeds than bringing on personnel?
• How good of a manger am I?
• Can I make my buyer’s assistant/agent generate buyer and seller leads?
• What is the quality and longevity of my referral agent or the candidate for buyer agent/assistant?
• Where does the closed client’s information and contact information reside?
• What are the chances of leveraging the relationship for the future?
Consider this: Maintain buyer’s assistants and agents as salaried individuals, and use them in the most labor-intensive part of the buyer’s system, which is running the buyers around.
This way, you’re handling the qualification meetings and obtaining the signatures on the Buyer’s Brokerage Agreement. You’re in charge of lead generation activities, but you have help from the salaried individual. The actual carting around of the buyer will be lessened by virtual tours and other technological advances. But, as we all know, a decision cannot be made unless they’re actually physically at the property. This touring of properties can be handled by a commissioned, licensed buyer’s assistant or agent. However, I believe this to be a salaried, licensed employee activity and not a commission activity. The actual negotiating should happen with the rainmaker agent involved, and the rainmaker agent should receive all commission income.
This concept flies in the face of many top producers and “current” on the circuit speaking coaches. The reason is that I don’t believe the numbers have ever really been studied on a commissioned buyer’s agent/assistant. Most speakers on the circuit today have never sold real estate successfully or determined net profit from a top real estate agent’s operation. Please reconsider the use of a commissioned buyer’s assistant or buyer’s agent. When you’re using the hoop system, you’re only working with qualified buyers anyway. I think it’s a waste of money to pay a 50 percent referral fee to a hoop-cleared buyer.
As an alternative, you may be able to use a commissioned buyer’s assistant or buyer’s agent on the buyers who do not make it through your hoops. These are class “B” and “C” buyers, and you may go ahead and give all these people to the buyer’s assistants or buyer’s agents.
But why pay the overhead of an in-house person, when you can outsource? All major corporations in this country are learning the advantages of outsourcing. They’re not burdened by the overhead of an in-house person, the management responsibilities, the ups and downs, and all the other challenges with an employer, employee or independent contractor relationship. Outsourcing to another real estate agent for a large referral fee on class “B” and “C” buyers is probably the most profitable method of working with a buyer who you don’t want to handle, mainly the ones who don’t make it through the hoop system. Carefully consider your methods of delegation prior to hiring the buyer’s assistant or agent.
To contact Walter Sanford, email him at [email protected], or call 815.929.9258.
Published: July 12, 2007
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