Average Broker Commission Rate: An Indicator of Consumer Perception?

Posted on 21. Jul, 2009 by Robert Albanese

Sales agent’s competency in demonstrating the company’s value proposition greatly impacts a company’s ability to deliver value to consumers.  This in turn impacts how consumers perceive the value of your marketing services. Listing Presentations should include highlights of all products and tools that differentiate you, as well as all listing statistics that show where you outperform the competition (e.g., closed sales price versus original asking price, average days on market, etc.).  This will allow clients to compare your value proposition to that of your competitors and make educated and informed decisions.

Average Broker Commission Rate (ABCR) is the average percentage of commission collected on one side of a real estate transaction. Relatively small changes to ABCR can result in significant changes to Gross Commission Income (GCI) and profit.  In the example below, please note that the increase to ABCR is only .2%, yet the impact upon profit is an increase of $80,000. All other drivers (sides, ASP, % Retained etc.) have remained constant in the model, so the only characteristic manipulated is ABCR.

Each real estate organization must independently establish its own policies by creating listing parameters and holding agents accountable to performing to highly professional standards. Focusing on the following measurements will help assess ABCR performance and may provide an indication of consumers perception of service delivery.

• Study ABCR differences between agents within the same location. This may highlight those who are effectively communicating the company’s value proposition.
• Rank locations by ABCR. Is ABCR being driven up or down by specific regional factors? For those locations where patterns are inconsistent, seek to understand the factors the behind the phenomenon.
• Analyze listing data by measuring ABCR performance. Measure results with and without outliers such as one-time exceptions, new construction and referrals.

In short, measuring ABCR can present an accurate assessment of how consumers perceive organizational competency.  Consumers hire one real estate company over another based upon their perception of value delivered.  Certainly,  there should be an expectation that the service delivery will always meet and often even exceed those expectations.  Since consumers vote with their checkbooks, a quick study of ABCR could well be the best quality control survey available.

Posted by Robert Albanese in Brokerage Operations Tags: ABCR, Agent, Broker Commission Rates, brokers, Commission, Consumer, Finance, GCI, Gross Commission Income, Marketing, percentage, Professional, Sales, statistics