Nobody Would Ask the Landscaper to Work for Free, Would They?

The work of a real estate broker is real. The way the work gets paid, or more often does not, is the strange part.

I used to be a broker. I am closing out my last files and I will not be opening new ones. Now I invest my own capital. In real estate, I buy the property for cash and hold title while the developer entitles it, so a long escrow stops killing the deal, and I buy the note on income property that is in trouble. In healthcare, I fund the last clinical trials that unlock insurance codes for a product that already works. I sit on the other side of the table now, and I finally feel like I have a say in this game.

Distance changes what you see. A hockey player who becomes an analyst does not watch the game the way he used to play it. He had one job on the ice. Now he sees the whole rink, including the parts that made no sense the whole time and that everyone on the ice agreed not to mention.

What I see in the rearview mirror is not a profession full of bad work and bad people. It is the opposite. The work is real, skilled, and heavy. What I see is a profession that does the most work in the room under the one arrangement nobody else in the room would accept. I was angry about that for a while, several years in fact, mostly at myself for going along with it. I am past the anger. I have moved on. I will not change how the industry compensates its brokers and agents. What is left is the observation, and I think it is worth writing down out of respect for my former colleagues.

The $1,000 test

If you are an agent, run one experiment before you read the rest. Take a file you have worked for a hundred hours. Call the person you call your client and ask for one thousand dollars. Not the commission. One thousand dollars, for the work done so far.

You already know the answer. You will hear some version of: you make so much when it works. I do not have it. This is not the way this works.

Nobody says that to their attorney. Nobody says that to their CPA. Nobody says it to the landscaper. And nobody says it to you when you are paid a salary every two weeks for work you have already done. Ask yourself whether you are paid for your work, or paid for a result that fifty other people control. Agents are paid for the result. The work is a donation until the result arrives. It rarely does.

That is why I say the business is about luck, not real estate. The real estate is the work. The luck is the pay. I hope you are luckier than I was.

The landscaper test

For years I looked for an analogy that fit. Here is the one that finally did.

Picture a landscaper who goes door to door with a beautiful brochure. He will redo your front yard, fix the irrigation, clean the gutters, and keep it all perfect for months. Do not worry about paying him. If you eventually sell the house, and if the sale goes through, he will take a percentage at closing. If you change your mind, or the buyer walks, or the appraisal comes in low, he wishes you well and drives to the next house.

Nobody would take that landscaper seriously. Yet that is the listing presentation. Word for word, that is what your agent offers.

Now flip it. You are hiring the landscaper. You tell him: bring your own truck, your own tools, your own crew, your own insurance. Work every day of every week, and on weekends too, until the property is impeccable. I may pay you in several months, maybe, perhaps, but only if about a hundred and fifty things go right, most of them outside your control. If any one of them goes wrong, you will have been paid nothing. You will probably get a look of disappointment from the "client", probably not even a thank you, and you eat the fuel and the labor. Isn't that foolish?

No landscaper would sign that. No housekeeper, no tailor, no hairdresser would sign that. Real estate agents sign it several times a year and call it a listing agreement.

What the word "client" means

The industry says "my client" constantly. Look at what the word means. A client is someone who pays you for your work. If someone comes into your restaurant, eats a full meal, and leaves without paying, you do not tell your spouse that a client came in tonight. You say someone dined and dashed. You feel like you fed a dishonest person, and you did. Most people will feel sorry for the server. Poor thing, six trips to that table and no tip. What a shame. Eventually someone might mention the owner, who paid for the food, the electricity, the cooks, the maintenance, and the staff. A person who dines and dashes is not a client. That person is a freeloader. Plain and simple.

A broker has very few clients under that definition. A broker has people he is working for, at his own expense, in the hope that they turn into clients at closing. Most of the time they do not. That is not a knock on those people. It is the structure they were offered, and anyone offered free professional work will take it. I most certainly would not. Never have. Never will.

A colleague once rebuked me for this view. He was trying to convince me that hiring unpaid interns, and he sometimes has four or five of them at a time, was doing them a favor, because they get school credit. I completely disagree. It takes audacity to make people get out of bed, dress up, get in their car, and show up at a set time for the benefit of your business, and it takes delusion to believe you are doing them a favor by not paying them. If that is you, shame on you. I will not hire an intern and I will not ask anyone to work for free. Ever. Pay your employees, even if they are students. Even more so if they are students. You want to coach them, but you are literally teaching them that their work has no financial value. That is just wrong. Stop it now.

The work is not the problem

I want to be precise here, because I got this part wrong the first few times I tried to write it. The work is not fake. It is a LOT of work. I know exactly what a good broker does, because I did it. I was told I was excellent, stellar, above average. Most of the people I gave my time and resources to did not even thank me. That is what made me so angry. The disrespect is everywhere. A hint for the public: thank your agent, sincerely and often. They are thinking about your project far more than you are. You might see about 1% of what they do for you.

Your agent prices the asset and defends the price. They find the buyer, or they find the property. They bring in a lender, sometimes two, when the first one re-trades. They run the calendar of contingencies, inspections, disclosures, and deadlines, and they have to catch what everyone else misses. They carry the tightest fiduciary duty of anyone involved. They must protect your interests at all costs. They read every page. They ask the questions. They send the uncomfortable emails, like asking whether their buyer can have a credit because the property was poorly maintained. They sit in the middle of a negotiation and hold a position their client would have folded on. They do this for months, on every project, and they do it well.

Every one of those tasks, performed by anyone else at the table, gets invoiced. I mapped this once on a large commercial sale: fifty ways the deal could die, matched against the people doing the work. In 46 of the 50, the professional who touched the task was paid regardless. The appraiser, the inspector, the surveyor, the attorneys, the title and escrow teams. All paid whether or not the deal ever closed. Two roles at that table were paid only at closing, and the broker was one of them.

So the finding is not that brokers do less. The finding is that brokers do the most work under the only arrangement that pays nothing when the work does not produce a closing.

Who trained the public

Here is the part I own. The public did not invent this. We taught it to them, one free listing presentation at a time. We covered the marketing, the signage, the photography, the software, the license fees, the insurance, the gas, and the hours, and we told people not to worry about it. We did it for the shot at the fee, and for the attention, and because everyone else did. After a century of that, the market believes what we told it: this work is free until it is not.

And what about the outrage over the ruling that a buyer's representative must have a signed agreement before writing an offer on their behalf? And the outrage at having to tell buyers they may owe your commission if the seller pays only their own agent? If you cannot have that conversation, how do you expect to negotiate a multi-million dollar property?

I have always agreed with that ruling, and here is why. Under the old model, the seller paid a commission to their broker, that broker had a cooperation agreement with the buyer's representative, and they split the commission, usually fifty-fifty. I always had a problem with this. It is very simple. The seller is paying the person who is negotiating against the seller's position. It makes no sense whatsoever, and it has no equivalent in any other business on the planet. The buyer's representative is literally trying to lower the price against the person who pays him a percentage of whatever number he arrives at. It is completely absurd. It has always been absurd. That is why I focused on representing sellers, so that I was always negotiating from a position of power.

I did this for years. I am not writing from above it. I respect the profession. I am only saying that its business structure is broken and needs to be rebuilt. I do not have all the answers, but one fix is simple: the agent bills by the hour, and those payments are credited against the commission at closing, if there is ever a closing. If there is not, it is ordinary 1099 income for work performed. It would also stop buyers from stringing along six different begging fools, none of whom know the "client" has five other relationships going. You are not that important. If they paid you, they would take you seriously. Right now, you are doing this to yourself. The "clients" think we are fools. I know. Now that I am out, they tell me.

The view from the other seat

Now I am the one with capital, and I am NOT looking for clients. I am looking for good deals. What arrives instead is a steady stream of people offering me their services for free until something closes. Another CPA. Another broker. Another insurance agent. Do you know who has never once solicited me? A landscaper. Landscapers are booked. When they work, they get paid, so they do not need to go door to door hoping.

That is not because landscaping is a higher calling than brokerage. It is because the landscaper's business is built honestly. The pay matches the work. The broker's business is built on a maybe, and it took leaving the business to see how strange that is.

I respect the work enough to think it should be paid for. That is the whole position. It is not a complicated one.

Respect follows the invoice

I believe a professional is respected in proportion to what he charges. Not because money is the point, but because the price is how a market says the work is real. Nobody expects a heart surgeon to operate for free. When one takes a case pro bono, it makes the paper, once, because it is the exception. The agent works for free as the rule, and nobody writes it up, because the market was taught that this is simply what agents do.

So this is written for two readers.

To the public: the next time an agent hands you a calendar of twenty deadlines and catches the one that would have cost you the house, understand that you are looking at professional work. It is the same kind of work you pay for everywhere else in your life.

To the agents: stand up for yourselves. Talk about your fee the way your attorney does, plainly, early, and without apology. If you cannot talk about your own pay, you may be in the wrong business.

What I do about it

I cannot fix the industry. The Legislature could, by giving a commercial broker the lien for an earned fee that thirty-four other states already grant. Until it does, I can fix my own table.

When a broker or a lender brings me a deal, or brings the judgment that pulls a stuck deal back to life, the work is paid for as it is performed. A modest retainer or advisory fee, then a success fee at close credited dollar for dollar against what was already paid. Nobody is billed twice. Nobody works for free. The broker is engaged rather than hopeful, and the loyalty runs to the outcome rather than to the commission.

I do this because a broker who is paid for judgment will tell me to wait, or to walk away, and those are the words that save capital. A broker paid only at closing is fighting his own paycheck every time he says them. I want the version that is free to tell me the truth.

A stuck deal is not worthless to me. It is usually stuck for lack of time or capital, and those are the two things I bring. Most of the stuck deals I have seen were carried in by a broker who had already done the work and was about to be paid nothing for it. I do not chase deals. They arrive, carried by the people who did the work. That work gets paid.

Labor Day

Monday is the holiday this country set aside for paid work. This weekend, your friends who are real estate agents are hosting open houses, writing offers, and chasing disclosures for a fee they may never see. Most of them will be paid nothing for this weekend. That is not a complaint. It is the structure, and theirs is the only profession at the table that still runs on it.

If you know one of them, thank them. Until the arrangement changes, they are practicing the most expensive hobby in the country, and doing it at a professional standard.

Benoit Lapointe invests in healthcare and real estate. He is the principal of Meridian in Newport Beach and spent years in the broker's chair before becoming a principal. benoitlapointe.com