Compensation

Competition

samuelabbottiii, , , , , 1 Comment

I’m an envious bastard.

There are a few (several) agents in my market that consistently sell more than me, and a couple of them have continued to grow and sell more despite my plateauing.

They’re good at what they do and they spend a lot of time and money in their businesses. I admire them, I know most of them fairly well. Still, when I see their success, it doesn’t make me feel warm and fuzzy.

Real estate is a zero-sum game. When they win, I lose. The notion that “there’s enough to go around for everyone” seems to have never been less true than it is right now. We have low inventory, a glut of agents, and few buyers that are willing and able to buy.

I used to hear that though: “There’s enough for everyone,” and I would feel reassured. I remember when I first got into the business in early 2018 and my then-broker would talk about what it was like in a down market. She made the comment that they always made sure there was enough for everyone, but that they all had to tighten their belts a little.1

I’m not sure there’s going to be enough for everyone. I’m a pretty scrappy dude when push comes to shove. I have a somewhat trying upbringing and the Marine Corps to thank for that. But I expect that a lot of agents are going to struggle in the next few years—myself included.

Nationally, there are almost 7,000 fewer agents2 than there were at the end of 2022. But if you look back to August of 2022, there are almost 19,000 fewer.3

So people are getting out. For people who sell real estate who sell more than 10 deals per year, this is a good thing.

Why? You might think that it doesn’t make any difference if Janice stops selling real estate because she has a history of consistently selling 2-3 houses per year.

But what you may not have considered, is that Janice and all the other Janices out there are gobbling up the ones and twos, the here’s and the there’s, that you and the other top-producing agents would be listing and selling.

While they may not be on your radar, they ought to be in this regard. They’re eating up deals.

I’m still a pretty competitive person, whether I like it or not, and I don’t like seeing other people succeed. I’d like to though. It’s an intention. But I think this is still too primal for me. I’m 33 and have four kids and my wife’s home raising them. I’m competing with retired 65-year-old women who are married, don’t need to work, happen to know everyone, decide to get their license and they take off like a bat out of hell, for example.

I’m out for blood, man. I hate seeing them win. Makes me work harder.

It’s a weakness, a character defect of mine. And even though it’s not the type of motivation I aspire to be inspired by, it’s motivation nonetheless.

  1. For context, they were charging me and most agents there between 35%-%50% of every commission we earned. That’s not to mention that she was married to a doctor and co-owned the firm. I eventually left and went where I could make more money. ↩︎
  2. REALTORS®, with the numbers based on NAR‘s statistics. These numbers do not factor in licensees who are not REALTOR® members. ↩︎
  3. NAR – August Monthly Membership Report ↩︎
Competition

Gross Commission Income as a Yardstick of Success

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Or as a cat o’ nine tails! GCI is a metric we hear a lot in real estate. Everybody in an MLS can see how much everybody else is selling. For some of us, that means the pressure is on.

The tendency to measure oneself against one’s competitors is strong, I would imagine, in any competitive person. The ability to do that in an objective way by using statistical analysis is somewhat unusual in business, though less in sales.

But we real estate professionals have this ability at our fingertips! The different ways in which this is useful are numerous, but I haven’t heard anyone talk about the ways it’s not useful.

For a guy like me, having a yardstick to measure myself against my peers is not something I enjoy. My tendency is not towards feeling satisfied, but towards feeling as though I could be/should be doing more.

Maybe I’m unique in this way.

This aspect of measuring myself against others doesn’t feel particularly healthy or wholesome, and it’s not a good index of success. When I’m up, I enjoy thinking of all the agents that have sold less than me. When I’m down, I’m filled, at times, with envy and resentment towards my peers for being ahead of me.

The same phenomenon occurs when we see the highlight reel of people’s lives and we think, “Why isn’t my life so grand?”

The reality is that everyone has to deal with life. But we can get a distorted perspective of it due to only seeing one version of the life that those people want us to see.

The lesson for me is that sales volume isn’t the only way I should measure myself. I’m at a point this year where I’m at half of my annual GCI for last year, only it’s September 11th.

Ouch.

Granted, I have some plausible excuses, but what it really comes down to for me, is that it didn’t happen. I had several opportunities with buyers, who are real buyers, but they didn’t buy. Likewise with sellers. I’ve had several listing opportunities but the people didn’t end up listing. To be fair, I’ve also lost two or three to competitors. The market has become more competitive and more saturated, both in the sense of new agents as well as larger agents and teams gaining more market share.

Part of the trouble is that there aren’t many homes for sale here. We’re in a low-inventory/high-demand part of the country right now. I wasn’t able to put several of those people where they wanted to be, at least not yet.

Additionally, I could say that I worked the backend of building a real estate team with my business partner, and the focus on that this spring took precedence over production. I also had my fourth child in April. But more than anything, the first thing is the reason.

Unlike some, I work almost exclusively by personal referrals and direct clients that I know personally. Other than that, I have people that find me online and contact me. I do some intermittent advertising, but not really enough to talk about.1 Because of that, I get what I get to a large degree, and being 33 in an otherwise older community, sometimes that’s not million-dollar listings. Sometimes it’s piece of shit tear-downs where the guy needs someone to help him navigate the short sale process.

Now, in light of those things, it’s more reasonable that I’m at where I’m at. Furthermore, I have existing deals and will likely bring more to the closing table other than those between now and the end of the year.

Irrespective, it brings me back to the idea that I’m measuring my self-worth against other people’s sales volume. That’s the problem for me.

This is mostly a spiritual problem. I’m putting all my eggs in this basket (work) and consequently, I’m deeply disturbed in this situation because what does this mean about me?

So, if my identity is all wrapped up in my work, and I don’t feel like I’m making progress in other areas of my life, I’m going to be all fucked up when I’m not producing at work—even when it’s outside of my control. I have to diversify. Work is still work, and I still need to do it and do it well. But when I’m balanced in other areas of my life, I’m better able to endure difficulty when one area isn’t going how I think it should.

So, I blew the dust off of a novel that I wrote and began taking it through the fourth round of edits a couple days ago. I began making time to spend with my friends over coffee for a couple of days a week before work. I’m talking about the way I feel and the emotions I’m experiencing around this with my wife and my close friends. I just began a big reading project that I’m excited about. I’m considering how I can be of greater service in my life to the different people and organizations that I touch, especially my family at home.

I’m counterbalancing the other roles in my life. Ironically, I’ve been putting the majority of my focus on work this entire year. Between that and exercise and my family, little attention above what’s expected or required has gone into the other areas. A bigger conversation is my tendency to “work” more in terms of showing up, but not working effectively and efficiently while I am at “work”. So I could benefit from some practical remediation as well as spiritual, and that’s going to become a focus as I begin my business planning for next year.

  1. I’ll be doing more now. ↩︎
Gross Commission Income as a Yardstick of Success

Splits

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Yeah. Those. Couple things here. Currently, I have a split superior to any that I’m aware of in the industry (other than 100%-Because-I-Own-The-Firm Split, but one could assert that you would then have more expenses than I do). While that may seem like the golden goal for every new agent, I’m not convinced that’s true.

My split now is 90/10 with a $6,000 cap. There’s a transaction fee of 0.085% of the selling price of every side. That’s it. I have some (former) colleagues who complained that when you’re doing $20m+ of deals in a calendar year, that transaction fee matters a lot. Anything sub-$15m in volume though and it’s not really a huge deal for most people.

So, what do I get for that little bit of money? Not much. I have a broker of record. I have a Broker-in-Charge that I can call for help with big stuff that I don’t know how to field myself. There are some physical office spaces throughout the states that we’re active in. There’s a main HQ with an accounting/compliance team (helpful), and some marketing folks that don’t really affect me one way or the other. There’s a subscription to kVCore that I don’t really use. And E&O. That’s pretty much it.

I like this setup because I’ve been selling real estate for a while, know what I’m doing, and feel comfortable working autonomously. Beginning in a situation like this though, I think, is a horrible idea.

Here’s why:

There’s very little, if any, effort made to train new agents. There are some checkbox processes they have, but mostly you’re on your own. No office meetings, no mentorship, no real education. For me, in the beginning, that mattered a hell of a lot. They had no processes where I started (to speak of) other than latching onto someone.

I shadowed (I followed him everywhere I could) one of the top-producing, slick-talking, stud brokers in our area for my first 6-12 months. I rode with him, went on appointments with him, and worked for him (for free, even though he made me think I would earn money somehow). It was all a part of my education (way more valuable than money, in hindsight). I’d linger around his office. I’d stay late and he would often be there late too. It was good. It mattered.

I eventually left primarily because of the money. That, and because I felt like I couldn’t trust this guy that I was just describing. That’s a more complicated situation to explain, but it would be dishonest to ignore that it played a role in my leaving the firm.

At the time, that firm was taking 50% of everything I made. I had no idea how lousy that was until I found out I could make 75% with a $15,000 cap down the street (where I still hang my license). I couldn’t imagine how much money that was — what a difference!

Well, less than a year after I got to the company they cranked up the compensation plan to what I previously described, and I was even more happy about my decision.

But I’d be lying if I said I didn’t miss some of that comradery and contact we had in that office. My business partner began in that same firm working with that same man. We both miss it. But, we’ve come together and formed our own company (team), in part, so we can have that again by working together.

Not only is this a lonely business, but in the beginning, it’s so important to have people to model ourselves after. I still think it’s important for me to have that, and it’s an area that’s lacking for me and has been for a while. We’ve considered changing firms for that reason and may still — even at the cost of $5k-$10k per year in splits.

Little has done more to enhance my career (and my life) than learning, and one of the most immediate, effective, and thorough ways to learn is from people that you work with.

So, before you sign up for a cloud firm with people ALL OVER THE WORLD to support you, consider that it might be more advantageous for you (not to mention that it may increase the odds of you surviving in the industry) to join a team or firm that’s local to you (and has “culture” or at least people that give a shit about your success). It matters to have that level of support. I’ve seen countless people join my firm and office in the last several years who are no longer real estate professionals.

It’s a people business, but we’re people too. I’m an introverted computer nerd that happens to be moderately attractive and can talk 1-on-1 well enough to sell some shit. I hate rooms, I hate parties, I’m not that slick. I’d much rather be reading a book than be at your BBQ, and when I get home from your BBQ I want to lock myself in my house for two days to decompress. And I’m here to say that for me it was absolutely critical to be around people (and successful people at that) early on, and perhaps still.

Splits