Saturday, May 24, 2014

What About This Flat Fee Commission?

     Here is a conversation reported to me by one of my students in a recruiting interview.

     Rookie Recruit:  "If I sell a $100,000 house, how much is my check?"
He asked this question at my behest.  Here is a link to that article.,-A-Dozen-Questions-for-Your-First-Interview&id=6149977

     Sales Mananger:  "If you sell a $100,000 house and the commission rate is 6% and if it is a co-op transaction, and you collect the flat fee commission from the buyer, $3000 will come to the office and your split is fifty fifty, you will get a check for $1500.

     Rookie Recruit:  "What is a co-op transaction?"

     Sales Manager:  " When a house is listed with another Realtor, and we sell it, we call that a co-op deal.  We and the listing company split the commission.  Three thousand comes to us and three thousand goes to the listing company."

     Rookie Recruit:  " What is the flat fee commission?"

     Sales Manager:  "Here at this company, we charge a $300 flat fee commission on all transactions over and above the co-op commission.  If you for some reason don't collect that $300 from the buyer or seller, you have to pay it."

     Rookie Recruit" " If I did not collect this $300 from my buyer, my $1500 commission would turn into $1200.  Is that right?"

     Sales Manager" "Yes, that is right."

     Rookie Recruit:  " $1200 is what per cent of $3000?"

     Sales Manager: " Forty per cent."

     Rookie Recruit: "If I sell a $100,000 house and don't collect the $300 flat fee commission, I am only getting a 40% commission.  Is that right?"

     Sales Manager: "That is right."

     Rookie Recruit:"  If I collect the $300, do I get half of that?"

     Sales Manager: " No, the company uses that money to pay overhead and expenses.

     Rookie Recruit: " What does the company do with the other money?"

     Sales Manager: " They use that money to pay overhead and expenses also."

     Rookie Recruit: "So, the $300 is income for the company. Is that right?"

     Sales Manager: " Yes."

     Rookie Recruit: " Why do I not get half of it?"

     Sales Manager: " Because it is not commission."

     Rookie Recruit: " I thought you said it was called flat fee commission."

     Sales Manager: " Yes, it is called a commission."

     Rookie Recruit: " Is it commission or not?"

     Sales Manager: " Yes, it is commission."

     Rookie Recruit: " I do or do not get half of this money."

     Sales Manager: " You do not."

     Rookie Recruit: " If I sell a house to a buyer, I am supposed to collect this $300 commission from the buyer but I don't get half of it.  Is that right?"

     Sales Manager: " Yes. That is right."

     Rookie Recruit: " Is it usual for a buyer to pay a commission?'

     Sales Manager: " We try to collect this fee from all buyers."

     Rookie Recruit: " Do you collect this $300 fee from all buyers?"

     Sales Manager: " We collect it from about half the buyers."

     Rookie Recruit: "  So, I would be paying this $300 fee on about half of my transactions. Is that right?"

     Sales Manager: " Only if you did not collect it from the buyer."

     Rookie Recruit: " Even if I did collect it from the buyer, I would not get half of it.  Is that right?"

     Sales Manager: " That is right."

      Rookie Recruit: " Let me think about this. I will get back to you."


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