It’s hard to believe, but many commercial real estate firms still operate on a full-commission model. The National Association of Realtors recently released a news story about a commercial firm that switched it’s commission model to resemble the residential co-brokerage split of 50/50. Profits went soaring for Sperry Van Ness and I am certain their clients were much happier. Has this not been obvious sooner that the client is served best under the 50/50 model?
Is co-brokerage the “secret sauce for success”?
In less than five years, Sperry Van Ness, a commercial firm based in Irvine, CA, has seen its annual sales balloon from $1.5 billion to over $10 billion per year. The secret to the company’s success, president David Frosh reveals in the August issue of California Real Estate, is co-brokering. “If you look at the way commercial real estate is structured, the full-commission model really operates the opposite way of what the customer wants,” he says of the traditional commercial model. Sperry Van Ness splits its commissions 50-50 and provides aggressive global marketing of its properties. By replicating how residential firms operate, Frosh believes the commercial business can offer better services for its clients, improve its image, and increase the bottom line. “We ought to be about proving the value of our services rather than trying to hold on to what we’ve got,” he says in the profile. “The best way to prove to somebody that you deserve a higher fee is to do more for them.”
