Much ado about compensation

Letters From the Home Front
By Kris Berg, Wednesday, February 25, 2009. Inman News

It's the debate that "just won't go away," I read.

"Hmm," I think. What could that be? Is it the debate about how we got to a place where millions of people have lost their homes and many more will likely fall victim to foreclosure in the coming year?

Maybe it is the conversation about how lenders are pricing their foreclosure inventory using the dartboard and dreidel method of valuation, dragging an entire market into the abyss in the process. (In the case of a tie, the Ouija board shall dictate.)

Maybe it's the discussion on industry standards and ethics -- the one that challenges the theory that a home purchase or sale can easily be orchestrated while working the night shift at Jim's Pizza Emporium.

No, the real debate involves my tax return. I simply make too much.

If we are to be fair, this is not a new argument. I have been bilking the consumer for years -- in my case, 12 years. And what a fun and frolicking 12 years it has been.

Through up and down markets, through thick and thin, I have enjoyed the "freedom" that is a real estate career. I have been able to take calls and make calls from my daughters' birthday parties and field trips.

I was able to take time off to see my oldest receive her high school diploma and then spend the after-party crouched behind a parked car listening to a client counsel me. "I know you are busy with your daughter's school thingy, but I have left three messages in the past two quarks, and I need to know if you received the inspection report."

During the boom years, I made too much because homes sold quickly, forgetting for a moment that representing a buyer required us to set up encampments in our idling cars so we could beat the sign installer to the door with the offer, a process we would repeat 11 times before hitting pay dirt.

During the transition years, I made too much because, even though selling a home involved more heavy lifting, sellers were starting to see their net sheets shrinking and felt we should all toss a few coins in the jar. Today, I make too much because, well, it's just fun to say so I suppose.

It's the debate that won't go away.

Maybe it's just me, but all of this outrage where my paycheck is concerned is starting to feel a little manufactured. I am here to tell you there is no need. I have enough outrage to go around.

Suddenly, we are concerned that my compensation might not benefit the consumer. Last time I checked, the consumer had an unlimited number of choices regarding agents, services and fee structures.

You want a flat fee? Those models exist. If you want to pay $500 or $5,000, there is someone who will gladly take the job. If you want to employ Aunt Margaret to represent you in exchange for a testimonial letter and a Bundt cake at closing, she just might bite.

You can pay 1 percent or 20 percent, or you can pay as you go. You can even do it yourself. The world is full of choices. What I charge is what I am worth, and what you charge is what you think you are worth. The debate is lost on me.

If, as an agent, you think you are overpaid, then you are. Change your model and charge less. And if we are running out of controversy, maybe we should move on to more pressing issues like customer service, industry standards, and ethics -- and something about the other agent who won't return my phone calls when I have a offer to present because I am not a buyer waiving a checkbook above my head.

For me, I charge what I am worth, but I make far less than I am worth. When a client was recently laid off one week before closing, I was laid off, except he had severance pay and now qualifies for unemployment benefits. I enjoy neither. I suspect many of you, like me, have spent six months with a buyer who decides not to buy.

Many of us have spent our weekends running the Chamber of Commerce shuttle tours for people expecting to relocate and then decide not to accept the job offer or don't get the job offer. We routinely find that we have spent weeks or months promoting a listing and generating an offer only to learn that the seller "needs" to get a little more, even though the number on the purchase agreement looks suspiciously like the one we suggested should be reasonably expected when we initially met to get things rolling.

Deaths, births, divorces, marriages, employment, unemployment, and change of heart: Stuff happens. And when it does, we haven't worked for free; we have worked at a loss.

Yesterday, I called in sick. Well, that's not entirely true. I delivered the message in person, on all fours and looking like I had been whopped repeatedly with an ugly stick, as I met with two clients to get contracts signed and another to attend a final walk-through.

You see, I am paid only for delivering the goods and, more importantly, my clients aren't buying or selling a pair of shoes. We are talking about a financially enormous, highly stressful, life-changing event. There are no sick days.

I take vacations. They involve enough electronics and power cords to stock a small trade show. Did you know that your cell phone works on the beaches of St. John? I do.

It was a $1,000 lesson learned while trying to negotiate a purchase agreement on the behalf of a client who was quite irritated that a trip I had booked six months prior happened to coincide with a buyer's decision to make an offer on their home. Of course we do get "paid vacations." This is what we call the vacations we take while we are paying another agent to cover our business.

I also get paid health insurance. It's paid by me, in gold bullion, and I have had three carriers in as many years because it seems that a member organization numbering in the millions cannot find an insurer willing to make a long-term commitment to my well-being.

As an independent contractor, I pay Social Security and then I get to pay it again -- the employer's share. I pay board dues and lockbox and license fees. I pay for the business trappings that result in my garage frequently being confused with a Staples distribution center, while my home office looks like the clearance aisle at Best Buy.

I pay for my own pension plan. The latter is whatever I can sock away depending on the winds. This year, it is sorely underfunded, which is probably a good thing considering what the stock market has done.

My job is flexible, though. It is so flexible that I can work all seven days. Escrow companies, photographers, print shops and the county recorder are open weekdays.

Our clients are open on weekends -- and in the evenings after 7 p.m., because that is when the baby sleeps. During my free time, I blow off steam with a legal brief, a good article on housing trends, or a class on new disclosure laws.

What I am selling is a service, but it is the product that drives my income, and I do not control its production. I live on a cash-flow rollercoaster that involves very high "highs" and excruciatingly low "lows."

For all of my exceptional efforts, selfless heroics and best intentions, one terrorist event or economic recession can change my pay scale, as can the occasional change of heart or mind, and I rarely get my 30 days' notice.

"But representing the sale of a condo is no more or less difficult than representing the sale of Belarus!" you say. Sometimes that's true and sometimes not.

Yet, percentage-based pay systems are not foreign to us. Try charging the same flat sales tax on a Hummer that you do on a pair of Rollerblade skates and see what a big round of applause you get.

And there are losses. Because we at least strive to be for-profit businesses, the losses have to be considered in the fees we charge. Not fair? When you buy that pair of shoes you are paying in part for the guy who shoplifted his, much like the price of the steak at the store reflects all of the steaks that were not purchased and had to be tossed out.

Consumers should pay up-front, then. Only they won't. It is much more appealing to play with house money, which brings us to the subject of risk. I incur it all. There is risk every time I pay thousands to market a home only to find that the seller has changed his mind and every time I write the fifth offer for a buyer client to learn they that aren't having fun anymore or that her brother just got his license. And there is risk every time I walk into the office that a frivolous lawsuit will be waiting for me.

If I sound angry about the work, I am not, because I have defined my own scope. What I am angry about is that my income is even up for debate. This business of bilking the customer, while fun and sometimes extremely rewarding, is costly. I have paid dearly with time, money and sacrifices in my personal life. So I charge what I am worth, as should you.

Oh, and I wouldn't worry too much about the consumer where our fees are concerned. He has plenty of choices, and I respect him enough to know he will weigh his options and make the decision that is in his best interests given his particular circumstances. Respecting the customer -- now that might be a topic worth debating.

Kris Berg is broker-owner of San Diego Castles Realty. She also writes a consumer-focused real estate blog, The San Diego Home Blog