What Compensation is an Agent Really Worth?

By MICHAEL EDLEN | Special to the Palisadian-Post

There are people who feel that real estate agents get paid too much. They believe that all real estate agents are basically the same, provide the same services and therefore the fees they charge is the best criterion to use in selecting an agent.

Correspondingly, many real estate agents feel that in order to be competitive with all the other agents they must offer their services for a lower cost.

To keep the numbers in perspective, in 2018 there were 231 homes sold in Pacific Palisades. There were 267 agents involved in these sales, which translates to a median average of just one sale per agent for the entire year.

This is obviously an area where competition is tremendous, however, it must be noted that a license does not equate to or determine competence.

Sellers

As a consumer, of course people choose which agent to employ based on a variety of factors.

Some decide who to work with based on a general feeling or connection with that agent, the one they feel most comfortable communicating with or feel they can trust the most. These sellers often decide that their comfort level is so important that the fees paid is of much less significance.

They regard the value of a highly experienced and seasoned agent who has had hundreds of transactions as being that much higher than an agent who has had a couple dozen transactions in their entire career.

Other sellers base their decision mostly on which agent quotes the highest possible sale price and is willing to work for the lowest fee they can negotiate. Because they assume that a lower commission must result in more money to them, these sellers believe that their house will sell for about the same price regardless of which agent they hire.

Having counseling more than 2,000 potential sellers over a 30-year period, I have observed a wide range of seller beliefs, values, assumptions and feelings.

Many tend to prefer discount service agents and companies (Redfin, for example), seriously believing that it will enhance their bottom line. Others see a much higher value in having the best agent or team working on their behalf.

So what makes the difference in value or could be considered as added value? Does greater experience always translate into a higher knowledge and skills that benefit the seller?

One element to consider is the many roles agents may be required to play during a transaction and how well they perform them. The most apparent aspect is the management of an enormous amount of details during the property preparations, marketing, critical negotiations and escrow process.

Agents are often involved in countless hours of meetings and conference calls, and often run interference with the various people involved on both sides of the transaction. They must make the time to review, analyze, interpret and explain the dozens of forms that are involved, while also managing emotions.

Other not-so-obvious roles of an agent include being strategic negotiators from the inception of a listing, advocates of their clients’ position, educators of potential buyers and effective communicators of facts and feelings.

Even less tangible, but potentially of inestimable value, is the role of an agent who is able to serve almost as a therapist and who has the skills to relieve stress rather than inadvertently add to it.

There are many agents who provide the added value of greater availability, varied and specialized expertise, or greater support through a team structure. Naturally such agents generally receive a standard compensation for their services, rather than accepting employment on a discount basis.

Of course, most of these agents will also be able to prove their value by showing statistical verification of their better results.

Buyers

Although today’s buyer has easy access to the data, inventory and quick valuations in any given marketplace, an agent will almost always provide a level of needed professional input, guidance during contract negotiation, inspection process and analysis of all information—not to mention the many hours devoted to physically previewing property on behalf of their client.

Furthermore, interpretation of all the data requires in-depth understanding of the product and context. Moreover, the contract and escrow period often involve numerous complexities (as mentioned above) that can create difficulties for the buyers as well as sellers.

Michael Edlen has been the leading Pacific Palisades agent for over 25 years. He may be reached every day for consultation at 310-230-7373 or michael@edlenteam.com.