Cheri Simon

Brief Profile

The SVN Difference! 50% - 50% Commission Split Brings the highest reward for the customer and broker

Full Profile

COMPENSATED COOPERATION You didn’t get into the commercial real estate business to lose money. But did you know that the existing business model for commercial real estate may be costing you thousands of dollars in potential commission? Or that it takes the focus away from providing the best possible result for clients—the kind of results that yield referral and repeat business? It happens every day and the brokerage community has accepted it as the way business is done. It doesn’t have to be this way. Real estate expert and blogger James Kimmons recently asked, “Is the commission split model for the real estate brokerage business in danger of extinction? With virtually every other facet of our business changing, from marketing to delivery of services, can we really reasonably expect to maintain the status quo for compensation structures?” The Sperry Van Ness International Corporation (SVNIC) doesn’t believe so. Founded in 1987 on the Compensated Cooperation concept, the Sperry Van Ness® organization has been leading the charge toward change ever since. We are determined to shift the way commercial real estate business is done while also improving commissions across the board. THE WAY IT IS: As a businessperson, you understand how demand works. It’s Economics 101. When demand goes up, prices go up. The larger the market, the greater the demand. So why would anyone want to actually decrease demand? “The reality is that the market is one of the most segmented, fragmented,and dysfunctional markets in existence,” explains Sperry Van Ness President and CEO Kevin Maggiacomo. “It operates in an environment where the listing broker controls the flow of information to potential buyers, often causing the property to sell for less than market value.” It’s true. In more than 80% of commercial real estate deals, listing brokers share their listings with just a portion of the brokers across the country. Often, understandably, this is driven by a profit motive. “The more that a broker quietly markets an investment sales listing in an effort to identify a buyer on his or her own, the greater the chance that he or she will earn 6% instead of 3%,” says Maggiacomo. Which sounds fine, until you realize what’s really happening: by limiting the property’s exposure, the broker willingly reduces potential demand for the property. “Do Real Estate Brokers Add Value When Listing Services Are Unbundled?” asks a 2008 paper produced by the National Bureau of Economic Research.2 In this study, economists B. Douglas Bernheim of Stanford University and Jonathan Meer of Texas A&M University looked at the housing market in the vicinity of Stanford to measure the effect brokers had on pricing. They note: “On one hand, brokers offer potentially useful knowledge and expertise. On the other hand, because the relationship between the homeowner and the broker resembles a classical principal agent problem, the broker may not deploy services in ways that promote the seller’s interests.” In their findings, listings that went through a broker reduced the selling price of the studied properties by 5.9 to 7.5 percent. In the paper, the authors cite a study by Steven D. Levitt and Chad Syverson, which emphasizes that an agent “has strong incentives to sell the house quickly, even at a substantially lower price.” In a Washington Post article from May 2013, real estate writer Kenneth R. Harney notes, “By restricting access to information...to relatively small Bernheim, B. D., & Meer, J. (2008, February). Do real estate brokers add value when listing services are unbundled? Market distortions when agents are better informed: The value of information in real estate transactions.