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GUEST OBSERVATION
There is a debate in the world about the use­ful­ness, and alleged obscene amounts of money earned by some pro­fes­sions. We are aware of the fact that real estate agents are not the most trus­ted pro­fes­sions in Aus­tralia.
In 2011 Aus­tralia Reader’s Digest sur­veyed 1000 Reader’s. Here is where we ranked in:
38. Celebrit­ies 39. Sex work­ers 40. Journ­al­ists 41. Taxi drivers 42. Real estate agents 43. Car sales­men 44. Politi­cians 45. Tele-marketers
I can see why the pub­lic has ranked us this way and I’m going to make it my mis­sion to expose the truth and show how rich we really are.
Are real estate agent overpaid?
The truth is that the aver­age real estate agent only makes a mod­est income of $47,457 per anuum. See inde­pend­ent resource Pay­Scale below:
Click to open in new window:
<a href="/images/2015/02/16/jhai%20feb%2017%20one.png" target="_blank"><img src="/images/2015/02/16/jhai%20feb%2017%20one.png" alt=""></a>
There is dif­fer­ence between a real estate agent and a real estate agency which fuels the myth of indi­vidual real <a href="https://www.payscale.com/research/AU/Job=Real_Estate_Agent/Salary" target="_blank" title="Estate Agents earning big money for selling a home. Real Estate Agent Salary (Australia)">estate agents earn­ing big money for selling a home</a>. The indi­vidual agent would only earn a por­tion of the com­mis­sion for each sale with the bal­ance going to his / her agency.
It would be com­mon for an indi­vidual agent to earn on third of the com­mis­sion for the sale and the bal­ance going to the agency he/she is work­ing under.
How many hours real estate agents actu­ally put in?
Just like any self-employed per­son you will need a pas­sion for what you do, a crazy work ethic and have some of the same insec­ur­it­ies as us real estate agents (no work — no pay).
On a reg­u­lar basis many of us work 12 hour days, includ­ing Sundays. We some­times work with cli­ents for two years or more before mak­ing any money out of the rela­tion­ship and some we may still be help­ing three years down the track without hav­ing done any business.
Risk V Reward
How many trades people would do all the prep work and put everything in place to com­plete the job, hav­ing paid for everything needed to get the job to the start­ing line, only to have to wait per­haps weeks, months or years to real­ise any form of pay­ment, if at all? And what if, after all that work and out­lay, the whole thing goes pear-shaped and falls over due to some­thing that the real estate agent can’t control?
If a real estate agent clocked in and out each time they worked on a par­tic­u­lar prop­erty, kept a detailed list of asso­ci­ated expenses and then did the math from the final com­mis­sion paid over the time taken to earn it, the rate would work out to be close to the min­imum dollars per hour as defined by the powers that be, in the major­ity of cases.
I want you to ask your­self this: how many people would work with no retainer, no car allow­ance, and every week­end, some nights, sup­ply your own sta­tion­ery, busi­ness cards etc and you only get paid if you get the results.
Now that’s not to say that some sales don’t cal­cu­late differently
Those homes that are lis­ted and sold quickly after only a short rela­tion­ship are, obvi­ously, far more prof­it­able from that view­point. How­ever, they are the excep­tion, rather than the rule.
Most people take around six to 18 months to sell their home from the moment they get the idea and start check­ing into it until the day the house settles.
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So if you work it out, here is the mega com­mis­sion you think a real estate agent earns for a sale.
The com­mis­sion cut up
Let’s say an even $10,000 for the pur­pose of this exer­cise and we’ll use all the low­est com­mon vari­ables: $10,000 com­mis­sion for six months work (180 days).
Let’s say at three hours per day, three days per week (just for argu­ments sake) = 216 hours = $46.30 / hour (approx).
From that, you need to take the fran­chise fee (if applic­able) at 10% = $41.67 per hour. Then take out the cut that the agency you work for gets — for an aver­age agent, that’s 50% - $20.84 per hour maybe a refer­ral fee. A
t this stage we haven’t even taken the taxes, fuel, car, phone, train­ing and other over­heads out yet.
I don’t see many of us retir­ing to Hawaii any­time soon on those numbers.
The reason agents are paid so much is the risk, how many people would go to work 10–12 hours a day six or seven days and pos­sibly not get paid?
Ser­i­ously think about who would go to work do their job, be on call, get dragged away from their fam­ily and then at end pos­sibly not get paid.
The aver­age agent earns $60-$80k per year work­ing hours that most would have their uni­ons shut down a work­place if they would forced to do, let alone at the risk of not get­ting paid.
Some agents not worth the money
A real estate agent will earn in dir­ect pro­por­tion to the amount of work they put into their job. Yes, there are a large num­ber of agents who aren’t worth put­ting out if they were on fire; that’s why you need to inter­view a few before you decide who to work with.
The Good
Just like any­one that is good at their job they are in high demand.
<ul>
<li>They have meth­ods, know online/offline mar­ket­ing, sys­tems, and a track record of success.</li>
<li>You will see their mar­ket­ing and sign boards every­where on a reg­u­lar basis.</li>
</ul>
Yes, a lot of agents go for price reduc­tions as their only option to sell prop­erty — but not good agents, they know how to do the job prop­erly and they can;
a) Price the home cor­rectly in the first place with a clear proven strategy in mind and
b) Will find the real reason why the prop­erty isn’t selling (put all B.S. to the side); it’s not always because of the price.
I will agree, some agents have egos lar­ger than the known uni­verse; they need some inher­ent belief in their own abil­it­ies to be able to get up each day and be told to ‘rack off’ by the next 40 people they speak to and keep com­ing back for more.
The Aver­age
It’s the old 80/20 rule. 20% of the agents make 80% of the money. A good real estate agent will con­tinue to learn and hone their skills over their career: oth­ers will plod along, last­ing maybe a year in a job they were never suited to but were drawn to by the prom­ise of unlim­ited earn­ing capa­city, total work/life free­dom and other shiny con­cepts that can’t be delivered without massive effort and con­stant hard work.
This is why we have a massive influx of Gen Y’s enter­ing the industry but they are lucky if they make it past the 12 month mark. We also have one of the highest churn rates of new staff and broken dreams as an industry (there is always fresh meet for the grinder in the real estate industry).
<ul>
<li>These agents don’t have a clear plan, meth­ods, they have no idea about online/offline mar­ket­ing, lim­ited sys­tems, and struggle to show a track record of success.</li>
</ul>
<ul>
<li>You will not see their mar­ket­ing and sign boards on a reg­u­lar basis.</li>
</ul>
The bad
When you inter­view these agents they fold eas­ily when you quiz them about their nego­ti­ation abil­it­ies. They will resort quickly to com­mis­sion cut­ting to get your prop­erty listing.
There is an old say­ing “price is only an issue in the absence of value”.
Good agents spend a lot of time and money learn­ing nego­ti­ation so if an agent can­not nego­ti­ate his/her fee what will they do with the price of you home? Hhhmmm. I wonder.
These agents are best char­ac­ter­ised by;
<ul>
<li>No clear method of nego­ti­ation and resort to com­mis­sion cut­ting to sign you up.</li>
<li>Lazy and want to belt the price to below the land value.</li>
<li>Don’t bother with decent sig­nage, then for­get to advert­ise the open house and won­der why no one turns up but use the excuse to say “your price is too high”.</li>
<li>Use of par­tic­u­larly bad pho­to­graphy thus tar­geted by buyer agents on the hunt for easy/cheap deals.</li>
</ul>
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Real estate agents are worth it for most sellers
A good agent earns his/her fee. As for the top earners? Yes there are a few who earn $500,000 a year, just as there are salespeople in other fields that earn that sort of money. But for every $500,000 earner, I will show you another 500 salespeople who earn less than $60,000, par­tic­u­larly after deduct­ing their vehicle and phone costs. Suc­cess­ful people earn good money, unsuc­cess­ful people do not. That is how the free enter­prise sys­tem works, people!
As for people selling their own homes, remem­ber that the skill of a good real estate agent is to get the buyer up in price, nego­ti­ate the deal. The aver­age per­son does not have this skill and gets less for their home.
What some people must under­stand is that most people do not sell and buy a ter­rific amount of houses in their life­time. For the major­ity they may sell one or two. For the most part sellers are very emo­tional when selling and at times tem­por­ar­ily insane. There­fore you need an object­ive party hand­ling the negotiations.
The per­sonal sacrifices
The thing is, real estate agents can be as wealthy or as poor as any­one. But what people for­get is the amount of sac­ri­fice of per­sonal time and energy that goes into suc­cess­ful agents.
To those of you who say they don’t deserve what they earn, I chal­lenge you — agents make the choice to either work their guts out to make the most they can, or they can cruise by and do the bare minimum, therefore earn­ing the min­imum wage.
In today’s world where even the smal­lest com­mod­it­ies come with huge price tags, most people have to earn as much as they can to sup­port their fam­il­ies and life­styles, but oh boy does it come at a price. Leav­ing before 8am and get­ting home at 9pm, kids school events missed, week­ends full of open homes and nego­ti­ation, and that bloody phone that can never be turned off!
You say they’re always out at lunch?
Most likely it’s a meet­ing with a cli­ent, or a nego­ti­ation. Swan into work whenever they want? Well sure, they’re mostly out of the office on the road clos­ing deals, doing inspec­tions or vis­it­ing homes for apprais­als.
Real estate agents live and die by the work they do and abso­lutely deserve what they earn. They give up a lot to achieve suc­cess, going from abso­lutely noth­ing to a thriv­ing career based on their own hard work and tenacity.
Look­ing rich is all part of good real estate agent marketing
Would you trust your most valu­able asset with an unsuc­cess­ful look­ing real estate agent?
At this stage you may be ask­ing your­self how come real estate agents own expens­ive cars, watches, and offices? As you prob­ably have already real­ised agents are all about per­sonal promotion.
To even get an inter­view as an agent you have to already look the part (espe­cially for me as Gen Y with no exper­i­ence at the time). For me that meant I had to get a car loan and buy a late model car, nice suit, watch and cuff­links (all on credit card).
I know many real estate agents that don’t really care about what car they drive, but unfor­tu­nately we live in a mater­i­al­istic soci­ety. Sellers make judg­ments whether we like it on not on such things, either it be sub­con­sciously or consciously.
Because we look suc­cess­ful, people have pre­con­ceived notions that we are liv­ing it up but in real­ity it’s all good mar­ket­ing. 
Why do I need an agent when tech­no­logy helps me do it so easily?
You may still be think­ing if someone wants to buy a house they will, and the real estate agent him/herself will have abso­lutely noth­ing to do with that decision!
This is true to some extent but at what price?
If you think real estate agents are a dying breed and you think you can sell you own prop­erty for top dol­lar. I think you should, but just make sure;
<ul>
<li>you don’t hold back on the marketing,</li>
<li>have a sys­tem of nego­ti­ation to get the best offer,</li>
<li>flex­ible work hours for buyer meetings</li>
<li>and do your best not to get emotional.</li>
</ul>
Although there are many own­ers who have the abil­ity to sell their own homes, there are mil­lions of oth­ers who are pet­ri­fied at the very thought. Here is one example that I have seen a few times. The “Sale by Owner” vendor has had what he con­siders to be an excel­lent inspec­tion with Mr and Mrs Jones. They are mak­ing good buy­ing noises, or so he thinks. They say “We will get back to you”. Two days go by and not a word! What does the private seller do? Does he phone them? The thought crosses his mind that if he does that, he might risk appear­ing as an anxious seller! Does he even have their con­tact details? Does he start to doubt his assumed abil­ity to be able to spot a def­in­ite buy­ing sig­nal? Hmmm! Maybe this is not as easy as I thought!
A good agent doesn’t have to worry about these things. He is not embar­rassed to phone Mr and Mrs Jones. That is his job! A good agent is also a damn sight bet­ter in spot­ting buy­ing sig­nals than the aver­age home owner. If Mr and Mrs Jones had been mak­ing genu­ine buy­ing sig­nals the good agent would have had them back to his office nego­ti­at­ing and filling out an offer! That is the difference.
<a href="https://realestatesevenhillsnews.com.au/2013/03/3-key-emotions-around-selling-property-and-how-it-can-cost-you/" target="_blank" title="3 Key Emotions Around Selling Property And How It Can Cost You!">Sellers that get emo­tional dur­ing the selling and the nego­ti­ation pro­cess usu­ally make irre­vers­ible bad decisions</a> (unknow­ingly), that cost them more than an agent would have. I have seen it almost on a daily basis and I will admit I have made many of the bad decisions when I first star­ted. This is why good agents spend thou­sands of dol­lars on coach­ing and train­ing of selling sys­tems. This human ele­ment of selling a prop­erty is why real estate agents will always be needed, but the way we sell is con­stantly changing.
Sum­mary
Now you know about the good, the aver­age, and the just plane incom­pet­ent. But not all is lost. By now you should able to dis­cern between the agent types and pick a good one.
If you’re still in the “I don’t need an agent” boat, that’s fine so long as do your home­work, are well pre­pared and do your best to not get emo­tional. I’ve seen many own­ers leave money on the table and not even know.
Jhai Mitchell is the internet marketing real estate agent for <a href="https://www.elderstoongabbie.com.au/" target="_blank">Elders Toongabbie</a> and <a href="https://www.elderskingslangley.com.au/" target="_blank">Kings Langle</a> and maintains a blog, <a href="https://realestatesevenhillsnews.com.au/" target="_blank">Seven Hills Real Estate News</a>.
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JhaiMitchell-KTraswnPwa

We work hard for the money - real estate agents are not overpaid: Jhai Mitchell

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GUEST OBSERVATION
I hear many stories where some buyers have been gazumped and others who struggle to obtain the right information from the agent to submit an offer. We even have sellers who don't trust their own real estate agent.
All of these things and many other grey areas do not lead to the best result for the buyers and especially the sellers. The problem lies in buyers and sellers not understanding the legal frameworks the agents are bound within. In this article I want to dispel the myths and the grey areas of common problems that buyers and sellers have with real estate agents.
By the end of this article you should be armed with the right knowledge to help your property transaction go through smoothly as possible.
<ul>
<li>How strict are the authorities?</li>
</ul>
Some people think the real estate agents can get away with murder. This is far from the truth as the perception of the industry is somewhat of a low one. Some surveys reveal that people trust a local sex worker more than their real estate agent. This perception has made us one of the most heavily regulated industries in Australia.
Real estate agents are constantly audited by the ATO, covertly spied on by Fair trading at auctions, taken to CTTT tribunals by tenants/landlords, disciplined by The REI, fined by Australian Securities and Investments Commission about advertising and not to mention being sued!
As you can imagine this is a hazardous industry for a business owner with so many governing bodies keeping it in line. As such, the insurances go through the roof to own and run a real estate agency.
Because of this and Australia's love for property, real estate agents are a target for governing bodies and journalists, as everybody wants to catch a real estate agent doing the wrong thing.
The truth is governing bodies love to make examples of real estate agents as it gets them a lot of publicity, it shows the public that they're doing their job. This leads into my next subject;
<ul>
<li>What are agents constantly apprehensive of?</li>
</ul>
Most agents just want to do their job to the best of their ability without being sued, fined, and or disciplined. This is the underlying tone of the industry but nobody really discusses it.
With every new tightening rule, law and regulation comes more paperwork and administration. We find ourselves using emails, text messages and data basing of diary notes just to cover our rear ends.
This comes as a double edge sword for buyers and sellers as they want everything done cheaper, faster and better. Sometimes this is impossible because buyers, sellers and lawyers like to target real estate agents and inadvertently add to the red tape/cost of running an agency.
This has forced real estate agents to hold the ground on their fees or risk taking shortcuts. I see this many times, for example where agents will show me (not knowing that I'm an agent) a property they have for sale that they do not have a contract of yet. It’s illegal for an agent to advertise a property for which they do not have a contract of sale.
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Gazumping
Gazumping refers to when you have a verbal agreement with an agent or seller to purchase a property at an agreed price but the property is not sold to you in the end. Gazumping is a very real problem but it's usually the lack of buyers’ understanding of the law and how contract signing works that gets them in trouble. The buyers in turn blame the agent. This is where our data basing of diary notes and emails comes in handy.
We find especially in a hot market, we have to repeat ourselves at least three times in three different ways for people to put in their best and final offer so they don't feel like we have done the wrong thing by them. Yet people still complain that they would've offered higher. In my observation, it’s easy to say this when things have cooled off and people are just annoyed that they have missed out.
The key to understanding this is not to crack open the champagne until the owner has signed the contract and it is dated. Without a date the contract is invalid. You signing a check with your 10% does not mean you have purchased a property. There are some sales strategies out there in which the agents get three signed contracts and then show the vendors from lowest to highest to get the vendors to agree to a price. The best way to get your contract signed is to make your offer the most attractive you can and this may not just be money but other things such as settlement and rent back options.
To avoid not being called back and missing out on an opportunity to raise your offer, I recommend to stay in constant contact with the agent. You have already indicated your interest, so it doesn't hurt your negotiation by constantly calling them. In fact it can work in your favour if the agent slips up and gives you more information.
Not knowing where you stand when it comes to your offer
My friends and I have invested in a lot of property so I know all too well the feeling of not knowing where you stand when it comes to submitting an offer. My observation of being on both sides of the fence is that it is mainly the lack of trust you have in the agent that is selling to you that creates this feeling.
I found a good way to combat this is to call their bluff on their creating a Dutch option which is illegal. Agents may get offended or annoyed but this is a valid question that I put to them during negotiation and keeps them in line, telling them that it is illegal for them to disclose my offers to other buyers.
Sellers lose money not trusting their agent
When selling you don’t need to like your real estate agent but not to trust them can cost you thousands of dollars. When you sign an agency agreement with certified real estate agent they are in a legal binding contract to work in your best interest to get you the best price for your property.
Agents have a fiduciary requirement to work in your best interest. It is illegal for them to work against you. This is in the back of the mind of every selling agent. They are in the middle doing their best to maintain their relationship with the buyer but also trying to achieve the highest possible price the your property.
Agents have their agency agreements audited all the time to see if there is any discrepancies that show collusion with buyers, nondisclosure, secret commissions, or getting the value of your property wrong. They can be caught out very easily.
This is why you don’t need to like your agent to trust them because they have no choice but to work in your best interest.
I will give you an example that I see happens every week in real estate that cost sellers at least $10-$20,000 on a selling price.
The seller normally thinks that their property is the best in the world and that’s fair enough if you have grown up in the area and have created memories in your home. However, this emotional attachment makes sellers think that we under-price the value of their home and that people would actually be prepared to pay more than the market price.
This is entirely not true and I see seller’s market high prices for their home, killing enquiry levels and interest in the most important first week of advertising. You will always get a peak of interest in the first week.
In fact more enquiry drives the price up and what usually drives enquiry is a low advertised price.
Note: The advertised price is not your asking price it is just advertising (backed up by comparable sales of course). Your selling price is completely different.
Many sellers do not trust agents when they explain this and that is understandable with all the emotions around property and money. But you really need to see it from a buyer’s perspective before you look at it from a seller’s perspective.
This concept can help you achieve above market price for your property, as agents are in the market every day. Remember the sale is not based on the advertised price but what others are prepared to pay when competing against one another, this is normally call a “market price”.
Summary
I challenge you to look up the rules, laws and regulations agents have to work within. This will help you have more confidence in your property transaction and dealing with agents.
Here are some resources I suggest;
<ul>
<li><a href="https://www.fairtrading.nsw.gov.au/ftw/Property_agents_and_managers/Rules_of_conduct/Real_estate_agents.page" style="line-height: 1.3em;">fairtrading.nsw.gov.au</a></li>
<li><a href="https://www.commerce.wa.gov.au/consumer-protection/real-estate-agents-and-sales-representatives" style="line-height: 1.3em;">commerce.wa.gov.au</a></li>
<li><a href="https://www.reinsw.com.au/iMIS15_prod/web/actsandregulations" style="line-height: 1.3em;">reinsw.com.au</a></li>
</ul>
Jhai Mitchell is the internet marketing real estate agent for <a href="https://www.elderstoongabbie.com.au/" target="_blank">Elders Toongabbie</a> and <a href="https://www.elderskingslangley.com.au/" target="_blank">Kings Langle</a> and maintains a blog, <a href="https://realestatesevenhillsnews.com.au/" target="_blank">Seven Hills Real Estate News</a>.
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Jhai Mitchell

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