Who are “luxury agents?”
I’ve been in the real estate business for 18 years. We’ve done over 1,500 transactions for over half a billion dollars in sales. Because of this, we’ve learned a thing or two. Historically, I’ve seen many agents desire to be called a “luxury agent” who can focus on the “luxury market.”
What does “luxury” mean?
When someone says they want to be a “luxury agent,” it typically has a lot to do with getting close to rich people: being their friends and charging them commission based on the value of their home. If the commission is based on home value, “luxury agents” can then often increase their pay without equally increasing their work.
What about non-luxury?
Rarely will you see an agent who says “I want to focus on first time home buyers! I want to focus on people who are struggling and don’t make a lot of money. I want to focus on teachers, policemen, and firefighters because they need our help.”
Unfortunately, you’ll tend to see agents migrating towards the luxury market. On Shark Tank, Kevin O’Leary actually calls this out, saying that the world has a big problem: real estate agents. I’ve been in the business for years, and at first it felt like he was taking shots at me, but I had to admit that he had something there. He said agents are eroding people’s net worth and equity.
What about your equity?
When agents want to focus on the luxury market, it has tangible effects. Sticking to only the selling side, if an agent sold one luxury home at $500,000, she’d make $15,000. If she were to sell another luxury home priced at $1.5 million, she’d make $45,000.
What has this luxury agent done that’s worth earning $30,000 more for the second home sale? They may talk about doing a wine and cheese for brokers (and it better be some quality wine and cheese they’re utilizing). They may highlight a certain magazine where the home is listed, but do these services account for the additional $30,000?
Just because you have the money, net worth, and dream home does not mean that you should give it away when you sell.
If you hear from someone who focuses on the luxury market, make sure they can quantify exactly what they will do for you to merit the extra money they’ll make. Ask questions, and do pay them more if they have a clear value proposition and clear additional benefits you’ll be offered.
And if they don’t? Preserve your equity. Don’t pay more just because you’re worth more.