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Real Estate Agent Marketplace

Pay for performance. Save money. Hire the best.

• Hows does ProOffer™ save me money when hiring a real estate agent?

  ProOffer™ saves you money in two basic ways. First, we create an auction for your real estate transaction business. Real estate agents are compelled to submit their best possible proposal to win you as a client because they can see who they are competing against and the overall median and low commission cost being put forth (that is, once you have two or more proposals. Individual real estate agent proposal details are for your private viewing). The second way ProOffer™ saves you money is by offering pay for performance commisssions that pay you real estate agents based upon their success in either getting you the highest selling price, the lowest buying price, or the quickest close. For more on this, read the PricePerform tabs in this section or select "Tell me more" (above this section).

• Why paying for performance makes sense for buyers and sellers

  Paying for performance makes sense because it directly links your real estate agents commission to how well they do getting you the lowest buying price, the highest selling price, or the quickest close. This is much different than current industry practice where the financial incentives barely exist because 90%-95% of an agents commission is set REGARDLESS of the eventual selling or buying price. Here is an example: Suppose you are selling your house for $500,000. Your agent will receive, after sharing their gross commission with the buyers real estate agent and with their broker-employer, about $10,000 in commissions to take home. If your agent negotiated a sale at $475,000 - a $25,000 loss to you - your agents commission will be reduced by a mere $500 to $9,500. Repeating this point, this $25,000 cost to you is only a $500 cost to your real estate agent. Real estate agents act rationally. They have little financial incentive to wait out a better price since they would be risking a guaranteed $9,500 commission to make an additional $500 or so. Although there can be reputational incentives that may compel a real estate agent to wait for a better price, the financial incentives are negligible. PricePerform, our pay for performance commission based on price outcomes, changes the equation by linking a much higher percentage of a real estate agents commission dollars to the final negotiated price so that your real estate agent makes more for getting you better prices and makes less for getting you worse prices. To see an example of how PricePerform works for buyer and sellers, select the button "See PricePerform in action!" above.

• I am a buyer. How do real estate agents get paid?

  Typically a buyers real estate agent gets paid by the sellers real estate agent. That is, you make no cash outlay when working with a real estate agent. However, there is a real, but indirect, financial cost. It works like this: A home seller hires a real estate agent to sell their home for a percentage of the selling price. The sellers real estate agent also agrees to give some of the commission to the real estate agent that brings a home buyer - typically half of the total commission will be paid to the home buyers real estate agent. So usually a home buyer does not pay for their real estate agent in a direct manner. However, home buyers pay commissions in an indirect manner because the buyers commission is embedded in the homes listing price. This means that home buyers effectively pay real estate commissions through higher prices for homes. Another way to think about is this: if the home seller only had to pay a commission to their real estate agent (the sellers agent) and not to the buyers agent, the home seller would have extra money to potentially offer you, the home buyer, in the form of a lower price. That is not to suggest that buyers don't need real estate agents - most buyers absolutely need the local knowledge and guidance of real estate agents - but that home buyers should be aware that they do pay real estate commissions through higher home prices.

• I am a seller. How do real estate agents get paid?

  The real estate agents of home sellers usually get paid a flat percentage of the selling price you get. Because this standard practice lacks properly aligned financial incentives between you and your real estate agent to achieve best prices, you should consider soliciting proposals that include our pay for performance commission model, PricePerform™. Let's look at an example of how industry practice works: a home seller gives, for example, 6.0% to their agent who in turn splits 3% with the buyers agent. The sellers agent will give about 20% to 50% of their commission to their broker employer leaving them with roughly 2% of the selling price from the original 6.0%. Let's put numbers to it: if you are selling your home for $500,000 and you have negotiated a 6.0% commission with your real estate agent, then you will pay the agent $30,000 ($500,000 x 0.06) upon the closing of the transaction. That $30,000 will be split with the buyers real estate agent leaving your agent with $15,000. Your real estate agents will surrender 33% of their commission to their broker-employer, leaving $10,000 for your real estate agent. So even if there is a good chance that another home buyer will come along and offer you another $20,000, your real estate agent has little financial incentive to stick around and wait for that new offer. Why? Because real estate agents don't want to risk losing the whole $10,000 commission to possibly make another $400 ($20,000 * 0.02). Under a standard commission structure, your real estate agent will only make 2.0% of every dollar you make which is just $400 in our example (commission rises to $10,400 from $10,000). Clearly there is little financial incentive for your agent to wait for a better deal. PricePerform changes this by shifting commission dollars towards achieving top home selling prices. Click the "See PricePerform in action!" above to see how it can power your home sale.

• What to look for in a real estate agent

  When hiring a real estate agent, you should spend time probing into their professional background. Preferably, you want to interview at least five real estate agents before choosing one. When asking the questions detailed below, be skeptical of the answers without data or independent people who can validate the answers you receive. Some basic questions to ask: 1) Are you licensed and what professional designations do you hold? How long have you been in the business? 2) Which buyers or sellers have you represented in my neighborhood(s)? What were the outcomes and were your clients happy? May I talk to your past clients? 3) How many clients do you currently have and what is your availability? Do you have a partner or an assistant and who will I be interacting with on a routine basis? 4) Do you have a real estate blog? (if so, read it!) 5) Tell me about the toughest negotiation you have ever encountered and how you handled it? Some further questions for sellers: A) What is your marketing plan? Besides the local MLS, where else will you list my home for buyers to view? Show me examples of other listings you have represented. B) If an unrepresented buyer wants to buy my home, will you take them as a client as well? If so, how will you manage the conflict? C) May I have references, preferably from recent clients? D) Tell me what the commission charge will be and how this best represents my interests? How much will you be giving up to the buyers real estate agent? Rationalize your PricePerform commission proposal.Some questions for buyers: A) How often will you notify me of new homes for sale? B) What tools do you suggest I use to learn about the neighborhoods I am shopping? C) What are the home price trends in the area I am shopping and what is your forecast? Show me an example of an over-priced property and under-priced property in my shopping area and tell me why you think so? D) How will you get paid? How do you handle situations where the commission being paid to you on one house is lower than at other houses? E) Rationalize your PricePerform proposal to me.

• What is the difference between a 'real estate agent' and a REALTOR®?

  A REALTOR® is a real estate agent that is ALSO a member of the National Association of REALTORS (NAR). NAR is a trade organization whose stated mission is to help its members become more profitable and successful. REALTOR® is a registered trademark of NAR and as such can only be used by its members. In contrast, a real estate agent is a person licensed in their state to sell or broker real estate but is not a REALTOR member of NAR. NAR has a code of ethics and standards of practice that its members must adhere to and that can be downloaded at their main site at www.realtor.org. Although in theory NAR offers some assurances as to the qualifications of a real estate agent, as a practical matter most states have rigorous licensing standards. Therefore you should feel comfortable working with a real estate agent whose qualifications you have verified in direct ways specific to your needs (see the ProOffer entry "What to look for in a real estate agent") regardless of whether they are REALTOR®'s or, more simply, licensed real estate agents.

• What is the difference between a 'real estate agent' and a 'real estate broker'?

  A real estate agent is the person that helps people buy or sell a home. A real estate broker is the employer of the real estate agent. Some real estate agents are also real estate brokers meaning they are self-employed. A real estate brokers role in your transaction is typically very limited and so you should focus your search on finding the best real estate agent rather than real estate broker.

• Why should I use ProOffer™ to negotiate pay for performance commissions?

  Competition among real estate agents submitting performance based commissions ensures that the proposals are priced in the clients best interest. That is, competition ensures that the proposals are fair. ProOffer™ compels real estate agents, through open competition, to put their best efforts into structuring a proposal. Negotiating a pay for performance commission without open competition could easily result in unnecessarily larger costs and/or lower performance.