How To Measure Your Actual Value As A Realtor

One day when I was managing a large brokerage in the Greater Toronto Area, a newer agent knocked on my door and wanted to talk. It was 2013, and the real estate market was healthy and thriving. Lots of agents were having a good year in business, except for this particular fellow, who just couldn’t seem to get things going.

He had been at the company for 6 months already and had gone through extensive training. Although he had yet to do his first deal, he was remarkably optimistic and I admired his positive outlook. But 6 months was a long time to not do a deal, and he was definitely off to an unusually slow start.

He admitted struggling to grasp how to develop unique value. Being new meant that he had no real experience doing any deals, and despite understanding the process of real estate, he lacked confidence since he never worked with a client yet.

In simple terms, he had nothing special to offer in a market of over 50,000+ agents in the city. Why would anyone choose to work with him when there were just so many options? He didn’t know where to start, and needed some advice.

I remembered that earlier in the week, I had visited a developer’s office where they were launching phase 3 of a townhouse complex about 15 minutes away from the office.

The project was selling new 3-storey stacked condo townhouse units (meaning a townhome where each floor is its own independent unit). Prices were in the low $300,000’s, and the layouts were spacious and well designed.

Each unit came with a parking spot, laminate floors, stainless steel appliances, and a locker. The development was in a perfect location – next to a massive park with an off-leash dog area, walking paths, and large ponds. It was a 10 minute walk to Walmart and a 10 minute drive to the new hospital.

Every buyer had the right to assign the unit prior to closing (which was 3 years away) and best of all, the deposit requirement was only $20,000 (not 20%).

It was the perfect occasion to get this agent out in the field.

Most people have $20,000 in a bank account somewhere collecting very little interest, and if they don’t have the money, they’ll find a way to come up with it when they’re presented with a good opportunity.

This project simply meant convincing someone to move $20,000 from one investment into another. By purchasing a unit, a buyer had the opportunity to own a property under construction, and if they decided to assign the property before closing, the appreciation on the property would far outweigh interest rates on a standard savings account.

So off he went, with an offering that suddenly gave him value. He approached his friends, family, and acquaintances and in that stretch of 30 days, he sold 5 units. By the way, the developer was paying $7,500 commission per unit. Not too bad for a month’s work.

For a brief moment in time, the experience taught him what it was like to be a real estate agent that could give value to someone. Using that experience, he went on to find other new developments that had good potential and started selling pre-construction units.

Your Value Swings Wildly

The business of real estate would be easy if you could repeat the same type of transaction over and over again. After a period of time, you’d get so efficient at it that you’d master the task and become an expert.

But real estate isn’t like that because the process of helping a client buy or sell a property introduces a wide range of variables. Unlike selling the same product repeatedly, such as selling apples at a farmers market, there are more influencers of change:

• Type of property – selling a condo is very different than selling a waterfront cottage
• Location – selling a townhome in the city is very different than selling a rural home on a farm
• Market conditions – selling in a buyers’ market is very different than selling in a sellers’ market
• Subjective Pricing – pricing is more of an art than a science and can never be exact
• Negotiation Outcomes – the strength of agent negotiating can vary based on skills and circumstances
• Human Psychology – real estate is very much an emotional game and in multiple offers, things can get wild

Further, the role of a real estate agent becomes even more arduous when helping clients with other types of transactions like leases, commercial sales, pre-construction purchases, and assignment sales.

Each type of real estate transaction requires a different combination of knowledge, time, and skills. This means that your value as a real estate agent is different depending on the type of deal you’re doing.

We are going to look at typical types of real estate transactions that you will likely encounter, and rank them based on a set of metrics to determine their degree of difficulty. The final score reflects the ‘value’ that you bring to the table when representing a client in that deal.

First we’re going to define the categories:

1. Complexity – how complicated is the deal?
2. Risk – how much potential is there for financial loss or complications?
3. Market Knowledge – how much expertise does an agent require?
4. Negotiation – what level of negotiation is required?
5. Access to Exclusive Opportunities – is special access or limited access required?
6. Time Investment – how much time is required to do the deal?
7. Client Dependence – how much does a client rely on an agent’s expertise or service?
8. Marketing – how much effort is required to market the property?
9. Legal and Regulatory – is there a higher need for legal and regulatory scrutiny?
10. Emotional Impact – how much is the client emotionally invested?

Next, we are going to rank each category on a scale of 1 to 5. The scores will be added up to give an average score, which is the Realtor Value Score that you bring to the table when representing a client in the transaction.

Although these scores are only general numbers, it’s clear that things like complexity, risk, and market knowledge can vary depending on the type of deal you’re working.

For instance, even in the home buyer category, the degree of expertise required to assist a buyer in purchasing a custom-built waterfront property would be more than purchasing a subdivision home in the suburbs.

The higher the score, the more valuable you become.

Why is this important to know?

How To Specifically Increase Your Value As A Real Estate Agent

Real estate agents struggle with improving their value because they’re trained to focus all their time on prospecting. And while this is the most important activity in an agent’s business, it leads to a reactive learning process where agents only sharpen their skills through actual deals.

In other words, getting ‘better at the business’ is not prioritized enough. There is no intentional strategy in place on how to develop skills when off the field.

Think about a professional athlete getting ready for a big tournament. They wouldn’t show up on game day without countless hours of practice and study beforehand. In the same way, agents should never rely on learning only from actual deals.

Athletes will allocate years to develop specific skills that would be crucial in a game-time situation. Some athletes can get so good at one particular thing, they rise above their peers and become sought after by teams for their extraordinary skills.

In real estate, the first step is to start thinking about where you want to specialize your skills. Most agents are unable to get very good at one thing because they’re shuffling between different trade types and going broad, rather than deep.

When you compound this with reactive learning habits, developing expertise in one thing is near impossible without extensive exposure to deals.

Specialization isn’t limited to transaction types. You can choose to focus on geographic areas, type of clients (ex. relocation buyers), types of deals (ex. estate sales), or types of properties (ex. luxury homes).

Once you’ve decided on the area you want to specialize in, identify the skill sets that bring more value to the deal.

Create a plan to intentionally improve these skill sets every day, even if you get so good at it that it simply means you put in practice time.

Let’s take an example to illustrate the process.

In the previous chart, we see that working with assignment buyers requires higher levels of skills. Some categories rank 5 out of 5.

Complexity: Writing an offer for an assignment purchase must address a number of conditions, detailed calculations, and crucial dates.

Risk: The offer needs to contain well-written clauses to protect the buyer, and assuming someone else’s contract for a property under construction creates risk based on circumstances outside of the buyer’s control.

Market Knowledge: Pricing on a unit that has no precise comparables means having strong knowledge of condo pricing in the area, and understanding aspects of the unit that may or may not affect its price (ex. height of the unit, view from the balcony, potential for obstruction of view based on future buildings in the area)

Access To Exclusive Opportunities: Assignment deals are rarely posted on MLS. How does an agent reliably find good deals for their buyer?

Legal & Regulatory: A deep understanding of clauses and conditions, condo documents, tax implications, and builder agreements is critical to protecting the buyer.

Now that we’ve identified some of the important skills, we now know which specific areas of practice and learning to focus on:

Having a precise plan of improving your value proposition takes away the mystery of how to become a better agent. Once you increase your value at something in real estate, clients will come looking for you.

I’ve previously written about this topic and you can read more here: How To Bring More Value As A Real Estate Agent