We don’t charge our agents desk fees at Perry Wellington Realty. You might ask, what are desk fees? These are fees that a broker charges their agents for desk space at their brokerage. From what I understand, desk fees are charged for the desk, and there are other fees to cover the office overhead- administrative staff, copiers, fax machine and other equipment. I understand they also pay for each copy page, each fax and so on.
If the agent has a private office, they pay more, as you would expect. These fees can really add up. Most brokers who have a ‘desk fee’ model also have the agents paying 100% for their advertising. These fees vary, but I have heard desk fees of $1,500 – $2,000 or more per month. Agents also have to pay for their own signs. I cringe when I see a $400,000 house listed with an inexpensive corrugated plastic sign on a wire stake out in front. I wonder what other shortcuts are being taken or costs being avoided to market the property.
In defense of the ‘desk fee’ model is the commission split. I hear agents keep 95% of the commission under this model. So if they are charging 6% on a $300,000 house they are keeping $17,100 ($18,000 x 95%). This is if they are ‘double-dipping’ as a dual agent. Something you should avoid as a consumer on either side of the transaction – buyer or seller.
My problem with this ‘desk fee’ model is that the broker makes money even if the agent isn’t making any money. Personally I prefer working cooperatively in the value chain – we sell houses, our agents get paid, our brokerage prospers. Everybody wins.
So why discuss this here? As a consumer, it is important to understand how the brokerage works that lists your home. Transparency is very important these days. It is important not just what is done, but how it is done. The motivation of your agent is very important to understand. This is why you see many agents who support dual agency – which we see as evil and we don’t practice.
Commission rates are coming down locally. We are seeing agents reduce their commissions across the board. We are however not seeing agents matching our 4.5% commission rate. Some will go down to 5%, but that is still a FULL 10% HIGHER than our fee. In these cases, agents are now offering LESS commission to the agent who sells your home than we offer – even though we offer that great 4.5% rate! Read that again for clarity. They are charging you more, and they are paying out LESS (not in all cases, all commissions are negotiable). Ask the agents when you interview them. You are interviewing a number of agents-right?
A reduction in commission rate slices into the agents who are paying desk fees. This comes directly out of their pocket. They are getting squeezed from three directions. 1) Less Dual Agency 2)Reduced commission rates 3)Desk fees.
Add to this the fact that clients WANT 4.5% and the business is getting tough. Clients are also wiser about dual agency and how bad it is for the customer if their agent works both sides of the deal.
Our point of view is that we need to give clients what they want. We built our business around that. Our business is CLIENT focused, NOT AGENT focused. This is what carries the day. Long term, this is what makes us successful.
Photo credit cubicles by Michael Lokner on flickr.com
Adam Conrad is the broker/owner of Perry Wellington Realty, a regional 4 location real estate brokerage. Adam is the Director of Education for Advance Academy, a real estate school. Adam is a part time lecturer at Pennsylvania State University and part time faculty for Saint Francis University. You can reach him via email here or at Advance Academy.