It’s no surprise that the boom and bust nature of the real estate industry can make it tough for agents to earn more and develop a secure financial plan. But, that’s not the only reason why Yoreevo, an NYC-based real estate firm, is offering real estate agents benefits and a salary. They think a business model that relies less on commission is better for clients, too.
Offering real estate agent benefits helps everyone
“When we hand a deal to our agents, we want them to be as pumped about the transaction regardless of if it’s a $300,000 studio or a $3 million condo. We didn’t want our compensation to be strictly compensation based because then the agents may or may not prioritize the higher deal because there’s more of a commission offer,” said James McGrath, who has been with the burgeoning real estate firm since its earliest days. “Commission is never good for the client. You get a big bullseye on your back if you’re a big deal, if you’re a smaller client you won’t get the attention.”
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Offering real estate agent benefits and a salary might also help solve another problem for the brokers — recruiting agents. Our research shows 83 percent of brokers have difficulty attracting new agents, yet less than 20 percent of brokers offer a 401(k) plan or health insurance.
“They get paid a salary so they don’t have to be paranoid and constantly worrying about their next deal,” McGrath said. They help agents by “taking all the financial risks off the table.”
Yoreevo makes the financials work by charging less commission and focusing on more volume. Agents can earn a bonus on top of their salary depending on each transaction.
So far, McGrath is a steady evangelist for this emerging real estate business model. “If I sat down and made a list of all the reasons why an agent should be salaried and not on a commission model, there’d be a lot,” he says. He’s hoping Yoreevo and firms like them will be the leaders in a new style of real estate. Yet, he cautions, don’t expect a traditional broker to make the switch to a new business model.
“I think it’s going to be very unlikely that a broker is just going to give you health insurance right out of the gate because their whole business model is based upon hiring agents and the ones that do well, great, the ones that don’t do well give up,” said McGrath.
Real estate agent benefits — the future or a fad?
“I hope that our model is the future,” he said. “If you can smooth out the deal flow and smooth out the rev ten and match it with the expenses associated with a salary and benefits I think it results in a better client experience which in itself if a circular feedback loop.”