Would you take this deal?
March 15, 2009 5:49 PM Subscribe
P/T rookie real estate agent in NYC: is 25% of 3% fair?
I'm a freelance research analyst who's about to get my real estate salesperson's license in the state of New York to take advantage of an interesting opportunity. Someone who's involved as a partner in two unrelated corporate finance deals I'm working on offered to be my sponsoring broker and pay me 25% of his share of the standard 6% commission he's splitting with another broker for every condominium unit I help sell. Is this fair compensation for someone who's just getting started? The deal is I'd commit to two hours of on-site work per day, showing units and answering questions about the property by phone while there. Since the units average a cost of 1.4 million dollars, I'd stand to make around 21 thousand dollars on each one, give or take. Even if nothing sold for awhile, I have plenty of other sources of income, so that isn't a consideration.
I know NYC real estate law states that if you're working for commission, you can't be required to put in a fixed number of hours each week. However, I really don't have a problem with it, since left to my own devices, it's almost guaranteed I'd work far more. In effect, it puts a nice cap on the "part time" commitment, which is a lot of the reason I'd be making 25% and not more.
I'm inclined to think this sounds reasonable, especially given that the broker said it could be re-negotiated as take on more responsibilities and gain more experience. Other positives: the site is a few blocks from where I live and work, and two hours a day leaves me more than enough time for all my other projects.
I'm going to insist that everything be spelled out precisely in a work agreement --"good contracts make for good relationships"-- but I'd like some second opinions on whether or not this is a fair deal, and would be interested to hear your thoughts and experiences. If you can think of any books or websites I should be reading to get up to speed, I'd be glad to hear that too. Thanks!
I'm a freelance research analyst who's about to get my real estate salesperson's license in the state of New York to take advantage of an interesting opportunity. Someone who's involved as a partner in two unrelated corporate finance deals I'm working on offered to be my sponsoring broker and pay me 25% of his share of the standard 6% commission he's splitting with another broker for every condominium unit I help sell. Is this fair compensation for someone who's just getting started? The deal is I'd commit to two hours of on-site work per day, showing units and answering questions about the property by phone while there. Since the units average a cost of 1.4 million dollars, I'd stand to make around 21 thousand dollars on each one, give or take. Even if nothing sold for awhile, I have plenty of other sources of income, so that isn't a consideration.
I know NYC real estate law states that if you're working for commission, you can't be required to put in a fixed number of hours each week. However, I really don't have a problem with it, since left to my own devices, it's almost guaranteed I'd work far more. In effect, it puts a nice cap on the "part time" commitment, which is a lot of the reason I'd be making 25% and not more.
I'm inclined to think this sounds reasonable, especially given that the broker said it could be re-negotiated as take on more responsibilities and gain more experience. Other positives: the site is a few blocks from where I live and work, and two hours a day leaves me more than enough time for all my other projects.
I'm going to insist that everything be spelled out precisely in a work agreement --"good contracts make for good relationships"-- but I'd like some second opinions on whether or not this is a fair deal, and would be interested to hear your thoughts and experiences. If you can think of any books or websites I should be reading to get up to speed, I'd be glad to hear that too. Thanks!
Seems fair to me. I am not a RE agent. I look at it as an opportunity to learn, to get a license and to make some money. I would spell out the part that defines "units you help sell". Is that showing it at least once? Is it showing it to the person who buys it? Is it answering a phone call? Etc, etc. And, the way I see it, you can always resign if it sucks right?
posted by JohnnyGunn at 7:22 PM on March 15, 2009
posted by JohnnyGunn at 7:22 PM on March 15, 2009
You might want to consult a lawyer to make sure the contract is solid. It would suck to have the other party refuse to pay you, and then when you sue them, the court refuses to enforce the contract because it is illegal. (I only mention this because you stated that New York law prohibits the arrangement you are considering.) IANYL.
posted by Happydaz at 7:24 PM on March 15, 2009
posted by Happydaz at 7:24 PM on March 15, 2009
I would listen only to an opinion from a real estate agent. That is the only opinion that counts.
posted by yclipse at 7:48 PM on March 15, 2009 [1 favorite]
posted by yclipse at 7:48 PM on March 15, 2009 [1 favorite]
I disagree that the only opinion that counts is a real estate agent. What does "fair" mean anyway in this context. If the poster feels this is a job he is willing to take, it is fair. This is a simple business proposition. If he is asking what do other agents get, then agents can and should answer. What does it matter what someone else gets in this case, only if it seems like it is worth the time and effort to you.
posted by JohnnyGunn at 8:19 PM on March 15, 2009
posted by JohnnyGunn at 8:19 PM on March 15, 2009
I'm a broker in Missouri, and needless to say our markets are wildly different (avg condo sale - $100,000 maybe). This sort of arrangement isn't common here, but not unheard of. In Missouri at least you can be required to be at the office for set hours, as long as you voluntarily agree to them first. The most common example is the office hours that require an agent on duty to answer calls and handle the random walk-ins who don't already have an agent.
To me, it sounds like a great way to get started, as long as the costs to you aren't overly high (dues, MLS, etc.). The only thing I would suggest discussing is how you are allowed to handle clients you come in contact within the course of your job. For example, a client looks at the place, decides it isn't for him. Are you allowed to offer your services as a buyers agent and look for other properties? I would assume not, usually those clients would be passed on to the main agent, but it is something to consider and iron out and details. Let me know if you have any questions.
posted by shinynewnick at 10:31 PM on March 15, 2009
To me, it sounds like a great way to get started, as long as the costs to you aren't overly high (dues, MLS, etc.). The only thing I would suggest discussing is how you are allowed to handle clients you come in contact within the course of your job. For example, a client looks at the place, decides it isn't for him. Are you allowed to offer your services as a buyers agent and look for other properties? I would assume not, usually those clients would be passed on to the main agent, but it is something to consider and iron out and details. Let me know if you have any questions.
posted by shinynewnick at 10:31 PM on March 15, 2009
I work for a real estate company in Seattle and arrangements like this are common for huge, new condominium projects. Be aware, if a sale fails, it's likely you will get nothing for your work.
posted by Carol Anne at 5:44 AM on March 16, 2009
posted by Carol Anne at 5:44 AM on March 16, 2009
First, my math doesn't agree with yours. Your broker stands to earn 3% on a sale of $1.4 million, which is $42,000. You'll get 25% of that, which is just a bit more than $10,000. Still not bad; if you sell just one unit every other month, that's really good for a part-time job.
Second, this sort of free-sharing arrangement is (I'm virtually positive) typical in the real estate business, though it's normally closer to a 50-50 split between the broker and the selling agent. But for that 50%, you as the agent would have to spend a lot of time (and often money) simply finding clients (to be analogous here, find people with houses they wanted to sell). And the typical sale would probably be way less than $1.4 million (among other reasons, people who own expensive real estate tend to look for very experienced agents to help them sell it). So, although "fairness" is hard to judge, this deal seems pretty fair to me - you don't have to spend any time or money marketing yourself, and you're selling expensive real estate that otherwise you'd be spending years and years, gaining experience, in order to be selected as an agent.
Finally, you might want consider this: how many hours per week is the sales office open, and how many sales have there been in the past (say) 30 days? Let's say that you're going to be the selling person for 20% of the hours that the sales office is open each week, and that two units have sold in the past 30 days. That would make your expected sales (with a lot of heroic assumptions about even distribution of buyers during weekday and weekend hours, and continued sales trends) to be one every 2.5 months.
(With regards to your making contact with someone looking for a buyer's agent, and thus ending up with a client - I wouldn't count on that; almost everyone you talk to already will have a buyer's agent, or be one, and where that's not the case, I have difficulty imagining that you could sell yourself - totally lacking experience - as the right person for helping them find the higher-end real estate that they're looking for.)
posted by WestCoaster at 2:44 PM on March 16, 2009
Second, this sort of free-sharing arrangement is (I'm virtually positive) typical in the real estate business, though it's normally closer to a 50-50 split between the broker and the selling agent. But for that 50%, you as the agent would have to spend a lot of time (and often money) simply finding clients (to be analogous here, find people with houses they wanted to sell). And the typical sale would probably be way less than $1.4 million (among other reasons, people who own expensive real estate tend to look for very experienced agents to help them sell it). So, although "fairness" is hard to judge, this deal seems pretty fair to me - you don't have to spend any time or money marketing yourself, and you're selling expensive real estate that otherwise you'd be spending years and years, gaining experience, in order to be selected as an agent.
Finally, you might want consider this: how many hours per week is the sales office open, and how many sales have there been in the past (say) 30 days? Let's say that you're going to be the selling person for 20% of the hours that the sales office is open each week, and that two units have sold in the past 30 days. That would make your expected sales (with a lot of heroic assumptions about even distribution of buyers during weekday and weekend hours, and continued sales trends) to be one every 2.5 months.
(With regards to your making contact with someone looking for a buyer's agent, and thus ending up with a client - I wouldn't count on that; almost everyone you talk to already will have a buyer's agent, or be one, and where that's not the case, I have difficulty imagining that you could sell yourself - totally lacking experience - as the right person for helping them find the higher-end real estate that they're looking for.)
posted by WestCoaster at 2:44 PM on March 16, 2009
You need to get more specifics on how this nebulous 'that you help sell' is defined, and what exactly your duties would be. You could be 'helping' by doing paperwork in the office or delivering things around the city without even seeing the client.
The exact circumstances that will you will earn a commission need to be well defined. Without this information neither you or anyone else can say if this is a deal you should take.
Also, find out what all of your expenses will be and who will be paying them. Some of these might be to the local Board of Realtors: membership dues, something for the lockbox, something for the MLS. Some offices charge fees every month, find out if you will need to pay these and how much they are. Keep in mind that you will most likely be an independent contractor, so you will need to pay all of your own social security taxes.
I'm going to insist that everything be spelled out precisely in a work agreement
Whoa, just noticed how you worded this -- are you implying that he has been attempting to get you involved in this arrangement without a written contract? (it does not sound like you would be an employee, this is not something that needs a 'work agreement', it should be a contract that both of you sign) If he is trying to tell you that you don't need a contract for this arrangement, I would run run run away.
posted by yohko at 2:45 PM on March 16, 2009
The exact circumstances that will you will earn a commission need to be well defined. Without this information neither you or anyone else can say if this is a deal you should take.
Also, find out what all of your expenses will be and who will be paying them. Some of these might be to the local Board of Realtors: membership dues, something for the lockbox, something for the MLS. Some offices charge fees every month, find out if you will need to pay these and how much they are. Keep in mind that you will most likely be an independent contractor, so you will need to pay all of your own social security taxes.
I'm going to insist that everything be spelled out precisely in a work agreement
Whoa, just noticed how you worded this -- are you implying that he has been attempting to get you involved in this arrangement without a written contract? (it does not sound like you would be an employee, this is not something that needs a 'work agreement', it should be a contract that both of you sign) If he is trying to tell you that you don't need a contract for this arrangement, I would run run run away.
posted by yohko at 2:45 PM on March 16, 2009
WestCoaster - I think the poster was assuming 25% of the 6%, but you are correct, it will almost always be 25% of 3%.
As for the 50-50 agreement, you are pretty much right on, WestCoaster, that is usually the case when you are an independent agent working for a broker. In that case, you are working on your own - you pay your fees, office dues, buy your own cards, etc. In many cases, that percentage changes depending on how much you sell (or how long you've been there - not as common). This situation sound more like an assisting agent, so I would say the lower commission needs to come with lower costs (unsure in this case) and/or higher probability of sales (which this does have - you're not going out to find clients/listings).
posted by shinynewnick at 6:01 PM on March 16, 2009
As for the 50-50 agreement, you are pretty much right on, WestCoaster, that is usually the case when you are an independent agent working for a broker. In that case, you are working on your own - you pay your fees, office dues, buy your own cards, etc. In many cases, that percentage changes depending on how much you sell (or how long you've been there - not as common). This situation sound more like an assisting agent, so I would say the lower commission needs to come with lower costs (unsure in this case) and/or higher probability of sales (which this does have - you're not going out to find clients/listings).
posted by shinynewnick at 6:01 PM on March 16, 2009
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posted by 517 at 6:03 PM on March 15, 2009