Inspiration

Letter from America

What can estate agents learn from the American Way?

Despite the differences, we have much to learn from the “realtor”

On a recent visit to Florida, and as part of my ongoing quest to discover innovation in estate agency, I took the opportunity to interview a typical American estate agent, or realtor, exclusively for Estate Agency News.

In view of the apparent differences between estate agency practice in the UK and the US (or Australia, South Africa, New Zealand, much of Europe, Puerto Rico, and in fact most places in the world), I thought it would be interesting to find out what are the issues of the day for our foreign counterparts.

Having practical experience of working as a qualified estate agent in the South African system, and being a Certified Residential Specialist (CRS) Trainer in the US system, in addition to 15 years agency experience in the UK, I was expecting to hear details of technological issues, and possibly the introduction of legalities that would not have a great deal of relevance to the UK.

What I actually discovered was that their challenges are virtually identical to our own, namely; competing agents deliberately overvaluing in order to secure an instruction (and often being “right” as the market has rapidly risen), an increase in the number of new, poorly trained agents damaging the reputation of the industry, certain agents doing anything within their power to secure business away from a specific competitor, difficulty in securing high quality sole agency instructions, and, overwhelmingly, the incidence of fee bargaining.

On the critical issue of commission cutting I asked Dave Mahanna, of Century 21 Estate Agency in Rotunda, Florida if the issue posed a real threat to the profitability of his business, especially if the market weakens. He told me of a shocking incident where an unscrupulous local estate agent had the cheek to reduce his fee to “from 6.5% just 5%”. I coughed and asked if he didn’t mean 0.5%? When I told him that some agencies in the UK are charging below 1% he asked why we bother. Good question.

So why are agency fees so much higher elsewhere in the world? The US system is more similar to our own than it is different, but let’s look at those differences in context before answering the question.

Firstly, properties are generally listed on a sole agency basis. Other agents in the area then have access to that property for their own buyers via the original listing agent, for a share of any resulting commission. The listing agent is therefore virtually guaranteed to get a sale (subject to realistic valuation) as he/she has the assistance of all the agents in the area.

This gives a better service to the client, as one trusted agent handles the whole sale process yet is not restricted in access to buyers. The central London market operates in a similar way with “half-comms” offered to reputable competing agents for a commission split.

So the agent with the best listing skills in an area tends to do well, even if they are weaker with buyers. (In my experience British estate agents are extremely weak with buyers, so they had better be exceptional listers!). American estate agents work very hard to be the agent of choice for future sellers, and use various methods to achieve this. They are proactive in managing their reputation, so that when it comes to justifying their fees, it is not what they are going to do for their clients, but what they have already done that counts!

Secondly, US agents operate an “open house” system, which seems only to be used for development properties in the UK. The advantages are tremendous. They not only encourage buyers to see properties in a non-threatening environment, but the fact that neighbours are also invited to view means that the agent can develop relationships with locals who will be selling their own properties in the future.

Thirdly, as mentioned above, our overseas counterparts work tirelessly with buyers. Whilst British agents tend to send out details in the post and encourage web visits hoping that the phone will ring, they pick up a buyer from their own home, or arrange hotel accommodation, and personally show them the area, schools, shopping facilities etc as well as properties until they buy. The agents really seek to understand the buyer’s lifestyle and primary motivators for a move. They do not simply accept what buyers’ say they want and need, but also discover why.

Fourthly, realtors need to be licensed, and as such are legally trained so they can draw up a simple contract of sale which can be signed and binding immediately someone sees a house they like. This leaves fewer opportunities for the sale to fall through. British agents should charge more because of all the hassles we have with solicitors!

Possibly the greatest difference, however, is the way agents are paid. They are self-employed, but pay for the use of the agency’s facilities. The agent then personally receives between 50% and 90% of the sales commission.

Whilst foreign agents need to be formally qualified (which can be gained over six evening classes) there is a passion for self-development. I once presented a training module to an assembly of over 800 negotiators, each of whom personally pay to attend these events several times a year.

In summary, the issues currently affecting American estate agents appear to be completely relevant to the UK market. The difference is that they constantly seek to be distinctive, and to enhance their service levels at every opportunity so that clients and prospects see the value in what they do. Only when the British public sees the value in what you do in relation to your competitors will you ever be able to charge a healthier level of commission.

If you have enjoyed reading this RAT(Rawlings Agency Tip) and would like one new one sent directly to you every week, free of charge, simply register here.

For other estate agency inspiration, tips and advice, click here.

© Richard Rawlings 2010
Richard Rawlings is the founding director of Estate Agency Insight, which specialises in helping estate agencies harness opportunity through innovative method, marketing, publicity, and training. He can be contacted at or on 0845 838 1354.

Top of Page | Article Index