By Bill Johnston
In our last column, which you can find by clicking here, we noted that the real estate professional’s success hinges on building long-term, mutually beneficial relationships with clients, colleagues and sub-trades.
The world of real estate brokerage is designed to foster co-operation among salespeople, regardless of what firm they are with. Today I sell your listing, and tomorrow you sell mine. Our MLS systems are more than just information-sharing tools. They foster the high level of co-operation that characterizes our business in most markets in Canada and the U.S.
The real estate board that I belong to has over 20,000 members. It covers a wide geographical area, which is broken down into dozens of neighbourhoods. Since salespeople (particularly residential specialists) tend to focus on specific neighbourhoods, our board membership is really a lot of small “villages”, each with a few hundred active salespeople in it. These villages become local real estate agent communities, where over time everyone gets to know everyone else. Our members who specialize in commercial work tend to evolve their own “villages” that include other salespeople with the same focus (office leasing, land assembly, hotels). It is within our particular village that our professional reputation develops.
If we recognize that we depend upon each other to make our village work, then we will adopt a long-term, win-win approach to our relationships with other salespeople. Because our villages are small, and because we are by nature very social creatures, other members of our community become aware of us fairly quickly. If we treat other members well, word gets out. If we don’t, word gets out.
I tend to avoid the few bad actors in my trading area, and you probably do the same in yours. Ultimately, the bad actor’s clients suffer, because the salesperson they chose does not get the same level of co-operation that others share in the trading area.
Unfortunately, there has been a downturn in the level of co-operation among salespeople during the past 20 years. Technology has contributed to this downturn. In 1985, salespeople did not have home offices and laptop computers. We went into the office to get new MLS information, and our offices were much more social than they are today. There simply aren’t the same opportunities for communicating with other salespeople, and lack of communication is detrimental to any human relationship, personal or professional.
Through ignorance on the part of some salespeople, the growth in popularity of buyer brokerage has contributed to this attrition in co-operation. Some salespeople wrongly feel that, because the buyer has client status in most cases, the negotiation of the sale has become a more adversarial than co-operative process. In fact, all we have done is make the negotiation process more logical by ensuring that both parties have the opportunity to have professional representation. As has always been the case, no deal will result unless both the seller and the buyer feel that the agreement is satisfactory.
Salespeople are like everyone else; we want to maximize the return on our abilities. When I entered the business in 1982, most of the firms in my area operated the same way. They offered a 50/50 commission split to the salespeople, with some improvement depending upon volume, and the firm set the rules. Salespeople were employees, not independent contractors. The firm paid for advertising and most other promotional material, and supervision was relatively intense by today’s standards.
Through the 1980s, other business models gained prominence. Salespeople were offered higher splits, but were required to cover more expenses directly. Independent contractor status replaced employee status generally, and salespeople were granted much more freedom in terms of establishing commission rates and work routines. The net result has been a general reduction in commission rates, particularly for the listing function, and a drop in revenue for many broker/owners. Another unfortunate result in some trading areas has been a drop in ethical standards as some brokers and managers abdicate their responsibility to monitor the behaviour of the salespeople registered with them.
Our goal in negotiating our contract with our company should be to obtain a fair return for our efforts while leaving enough on the table for the company to succeed. If the company fails to make a profit and therefore goes out of business, we will be forced to find a new firm, causing a great deal of disruption to our lives, and ultimately costing us business. As with every other relationship we enter into, the goal should be to establish a long-term, win-win arrangement.
Next time in Part 3, we’ll look at relationships with lawyers, accountants and property inspectors.
Bill Johnston obtained his M.A. in psychology from the University of British Columbia in 1976, graduated from Osgoode Hall Law School in 1980, and was called to the Ontario Bar in 1982. He entered the real estate brokerage business in 1982. He has won many sales awards and has served several terms on the Board of Directors at the Toronto Real Estate Board. He is a broker at Royal LePage Your Community Realty in Thornhill, Ont. Email [email protected]
