I’ve just changed The Property Market’s commission structure. Up until last week we charged clients 1% up to the CV of their property and 5% on the remainder above it plus GST but we now charge a more simple and straightforward fee of 2% of the sale price plus GST.
The concept behind the old commission structure was that it explicitly motivated us to work hard to get the best possible sale price and while it got us a fair bit of notoriety and some handy press coverage, the reality was that it rewarded clients who had a high CV because they paid significantly less than those with a low CV and for whom we achieved a high sale price.
The 1% bit of the old fee structure also appeared to create a perception that we were a budget real estate agency and any misconceptions around us just being cheap couldn’t be further from the truth. The feedback we get from our clients and our buyers makes me proud to have my name over the door and there is rarely a week that I don’t receive a call or an email thanking us for our time and energy and remarking on how the service we provide is a cut above anything else they have experienced.
The transaction of property – whether it’s for an investment or to provide a family home – is a hugely emotional decision so the real opportunity in my mind is to create a smarter real estate agency model that allows us to provide a better service. That’s why I’m hell bent on steering clear of the self-employed contractor status used by other real estate agencies and instead having salespeople who are employees on a base salary with a commission bonus for making a sale. This model exists in other countries (eg the UK) and also in pretty much every other organization on the face of the planet that has a sales team so I can’t for the life of me see why it can’t work in real estate. It also means I can employ a different type of salesperson and as real estate generally requires a truck load of energy, it makes sense to work with young, well educated people who don’t have any preconceptions about the industry and who are every bit as ambitious as I am to try a different approach to selling property.