I was asked by an agent who wants to focus on building listing inventory, and remove herself from working with buyers, how to go about compensating a buyer's agent.
Let’s reframe the question and ask, “What do you want a buyer’s agent to do for you?”
Her answer: Follow up on all my incoming inquiries and leads. Convert the leads into qualifying interviews. Conduct the interview. Get the buyer to sign an agency agreement. Select with them. Set up appointments. Show houses until they find the right one. Get the buyer to write an offer. Get the offer presented. Get a testimonial and 5-star recommendation. Put the client into my CRM. Pay me somewhere between a 25% and 50% referral fee.
What are the odds you can find an agent who can incubate and convert leads, conduct a buyer qualifying interview, select and show homes, close on an offer and get the offer presented and accepted – and then hand the client back to you?
What are the odds you can find an agent who is willing to put in all the time and expense of working with buyers, and then wait until closing to get paid? And get paid a fraction of what they would have made on their own?
You want to find candidates, interview, hire, train, and manage them? Even if you could, how could you possibly motivate someone to want to do all that?
There is an answer that will satisfy both you and a potential buyer’s agent. It’s called motivation made simple.
Carrot. Stick. Donkey. Cart.
Those are the four ingredients of motivation made simple. Think of it like a formula.
If the carrot is big enough, and the stick is short enough, and the donkey pulling the cart is hungry enough, and the load in the cart is light enough . . . Motivation!
It’s just an analogy. But I remember the day Floyd introduced me to it, and I can still see it clearly. That's one of the things I so admire about Floyd and why I love the way his mind works. He takes the complicated and makes it simple, memorable and easy to apply.
Floyd takes the complicated and makes it simple, memorable and easy to apply.
When you are asking a buyer's agent to do all of the above, A-Z. the load is too heavy, the carrot is smaller and the stick is too long. And it doesn't matter how hungry the donkey is.
First you need to lighten the load. Make it easier for them to do. Begin by hiring a showing agent first. Make the carrot a combination of immediate compensation for showing, a bonus if they write, and further bonus if the offer is accepted. You conduct the intake interview. The showing agent brings the buyer back to you for writing the offer. You keep the client.
Showing houses takes the least amount of skill and ability, and it is the most time-consuming. It's the simplest and easiest way for you to start replacing yourself.
If the showing agent is able to get the job done, then you can gradually expand the scope of their job and their compensation. If you are adding to the load, the carrot has to get bigger, and you have to keep the stick short.
Instead of trying to find the perfect candidate to take over everything you do, break it down into steps or parts. Start with the easiest part for your buyer’s agent to do and it will be easier to figure out fair compensation, and infinitely easier to motivate them.
The Floyd Wickman Team Blog by Mike Pallin