The Notorious POD Ep 15: Why Not Hourly?

I saw a Facebook post talking about a common problem with real estate agents — buyer disloyalty. That got me wondering, why aren’t we moving towards agents getting paid by the hour? It would solve so many problems.

The way that real estate agents are getting paid leads to a lot of issues, one of which is the problem of client disloyalty. A few others — desperation, lack of differentiation, not being paid like a real professional, lack of alignment in the interests of the client and the agent, etc. I thought I would muse on this as I’ve been thinking and talking about it for years.

Thank you!

-rsh

Ep. 15: Why Not Hourly?

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

6 thoughts on “The Notorious POD Ep 15: Why Not Hourly?”

  1. Rob,
    This concept may well come along when divorced commissions evolve.
    But for now..Mr Smith, here are my billable hours so far this week:
    1. Showing you homes 4 hours 15 minutes
    2. Writing,sending offers 3 hours
    3. Researching comps 4 hours
    4. Driving by comps 1 hour
    5. Checking permits 1 hour
    6. Calling listing agents 2 hours *includes emails and texting
    7. Answering your emails 1 hour 45 minutes ** excludes your free 10 emails a week

    Although we were not successful on the two offers you made, keep your chin up.. we are getting closer to success!

    Your invoice for the last 7 days $3400, billed at 17 hours/$200 per hour
    Please remit today!

    Thank you for your business!

    Reply
    • That’s exactly how professionals get paid. 🙂

      However, here’s what’s more likely if we move to this world.

      Mr. Smith, here are *our* billable hours for this week:

      1. Showing you homes 4 hours 15 minutes x Showing Agent @ $25/hr = $106.25
      2. Writing, sending offers 3 hours x Admin @ $25/hr = $75.00
      3. Researching comps 2 hours x Senior Agent @$200/hr = $400.00
      3a. Researching comps 2 hours x Junior Agent @$100/hr = $200.00
      4. Driving by comps 1 hour x Junior Agent @$100/hr = $100.00
      5. Checking permits 1 hour x Junior Agent @$100/hr = $100.00
      6. Calling listing agents, email, text 2 hours x Senior Agent @$200/hr = $400.00
      7. Answering your emails 1 hour 45 minutes x Senior Agent @$200/hr = $375.00

      Total = $1,756.25

      You can’t get away charging $200/hr for administrative work while your competitors are using junior staff. Law firms use paralegals and research assistants for the same reason.

      And then, when you do finally close, after spending an additional $2,000 in billable hours, here’s the statement:

      Commission from Closing = $15,000
      Rebate Amount = $3,756.25
      Total = $11,243.75

      Thank you for your business!

      Reply
  2. Rob,
    I always appreciate your efforts to move this “industry” towards being professionals. That is a worthy goal, but let’s face it, with 60 hours of “schooling” and a test requiring 70% right answers to get a F***ing license to advise people on important decisions…well ..it is not always that. In 2006, I traveled to Fort Collins Colorado to hear a very bright real estate leader say, among other things, that 5% of consumers will always choose the highest price, 15% always the lowest price and 80% the best value. I still believe that to be true. That is why, so far, despite “disruptors” like Redfin being “mature ‘ companies, they have not penetrated that barrier of value/TRUST to take market share that is “disruptive”.
    I like and support your idea of a law firm like structure for a real estate firm, but we are far from that now.
    On your revision of my hourly rates…will I support $25 an hour person showing and interpreting WHAT to write in an offer ..no I cannot put MY NAME on that…that is REDFINish..no disrespect intended. Some of the clerical stuff, OK…I can support that. But, in this market, we didnt even get into the 5-7 possible offers, two or 3 walk and talk inspections,etc. In a normal market…maybe this has more legs
    I think that your premise is, that the whole system is inefficient and to a degree wasteful. Unskilled agents get paid the same as skilled agents and frankly, the consumer cannot always tell the difference, because on the buyer side, the pay is the same-good,bad, or ugly performance. I agree.
    This pains me, but divorced commissions ARE the future, where buyer agents justify the amount that they will require the buyer to ask the seller to pay. But not REX-like, they are serving as a proof of concept that in my humble opinion, is killing their clientele in even GREATER inefficiencies. All of your hourly ideas then become a sideshow, of sorts. Are there any successful, not super high end, hourly concepts working today? The issue is maintaining trust when you DO the extra important things that a great , caring buyer agent does to protect the client and frankly, limit liability.
    So…increased education (1000 hours to cut hair in Virginia) 60 hours to sell real estate-divorced commissions…oh, and a limit to how many agents one BROKER can supervise ..THEN we might be on the road to professionalism, until then..we are what we are. Thanks for trying to advance the ball on this.

    Reply
    • Like your thoughts, Greg. 🙂 There’s a lot there that reminds me that I need to do a book review…

      Can’t disagree with anything you wrote. Sure, we can discuss the details like when one should and shouldn’t use a lower-cost assistant, but that’s small. 🙂

      Reply

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