DUBAI: There seems to have been a massive shift in the modus operandi of real estate agents as they tend to now close deals with clients not based on their market knowledge or investment advice, but on the extent to which they are willing to let go of their commissions … aka kickbacks.
Kickback is a term used to describe the percentage of commission the agent earned from the developer or seller that he or she is willing to give back to the client just in order to close the deal. The worst part about it, if the first agent is providing kickback of 25 per cent, the second agent will jump in and offer 30 per cent, at which point another will provide 35 per cent and so on.
The one that closes the business in the end is the one willing to take the maximum haircut on their earnings, regardless of whether they have any specialisation in that location, as that could be handy to rent out the property if it’s for investment. Or if they have potential buyers who might be interested in buying it in future.
We once had a buyer who we were pitching to for sometime, telling us that some agent out there is willing to give them a kickback of X per cent. And that if we want his business, we should provide him a higher kickback, to which our reply was, “Thank you and good luck dealing with your agent and enjoy the kickbacks”. We walked away from that deal happily.
Let’s look at this practically and then let’s discuss integrity. Suppose the client is purchasing a property worth Dh2 million and the developer is paying agents 3 per cent commission, which works out to Dh60,000. That’s probably your gross income as a certain percentage of that will go to your company.
Let’s suppose now the client is negotiating with you to give him or her kickback of 50 per cent, which works out at Dh30,000. Now, do you really think a client — a genuine client — who is purchasing a property worth Dh2 million will not purchase the property just because he or she is not getting 1.5 per cent back?
Don’t be worried that he or she will go buy it directly from the developer; you are the expert, the client needs you when the property needs to be rented, managed or sold. If the client still does not identify all these aspects, then it’s wiser to let go of that client.
Now let’s consider the integrity part of it. Let’s say you commit to the client you’re giving them kickback of 50 per cent. Don’t you think they are going out there to every other agent and sharing with them this feedback and asking for slightly higher?
Now, would you really want to deal with such a client who is not loyal to you, does not see the value you’re adding and does not respect you? If he or she can do that to you today, then he or she can do that to another agent as well tomorrow. So there is no future with this client. Walk away!
My fellow agents, try to equip yourself with the knowledge and expertise of the industry and see how you attract the right clients. I know you’re thinking what if the next agent doesn’t have a shred of integrity and still provides a higher kickback to the client to close the deal. Well then, so be it.
Understand that they are only worth as much as they can bend to the client’s needs, which can increase tomorrow and that will make them obsolete. Know that they are only there for the short term and will cease to exist within this sector.
Rejoice at the fact that you are playing the long-term game. When we all put our foot down to this kickback business, genuine buyers will have no choice but to deal with those who have the right market knowledge, expertise and are able to win the deal with their pitch and form a bond with the client.
Remember, clients will not do business with you if they like you, they will do business with you if they trust and respect you. Let’s all work together to achieve this common goal by having a level playing field and utilise our expertise to grow further and establish more long-term and meaningful clients.
— Aakarshan Kathuria is CEO of EstateUp Group