I Think Thee Protest Too Much
Lloyd Sherman, April 23, 2021
I read with interest and some frustration of my own with an article in this week’s HSV Voice titled “Village says 50 percent commission unfair to lot owners.” First, I’d like to dissect the headline. It states Village when in fact it is one individual who himself is actively involved in his own business of selling lots. It also stated “unfair to lot owners.” How so? I fail to understand how moving POA-owned lots is unfair to other lot owners. People who choose to sell their lots or houses FSBO are doing so with the full knowledge they are not paying commissions and can sell their lots or houses for whatever the market will bear.
This article also conflates the two POA/Realtor programs:
Real Estate Partner Program (REPP) – When Village Homes & Land was closed, the POA reached out to the realtor community, and collectively the REPP was established. This program is a true lead program whereby leads coming from the POA website, shows, etc. are distributed to the participating realtors on a rotational basis. Many of these leads are also part of the Discovery Package program and this program has been working very well since January 1, 2020. Realtors/Brokers do pay for these leads just as they would for any lead program they might be involved in.
Lot Program – Effective January 1, 2021 this totally separate program was put in place following an all-day meeting of the POA, Real Estate Brokers, POA Board and invited guests including Dennis Simpson who was the author of the article that stimulated this clarification. This program is targeted only on POA Owned lots. It is well known that the number of lots going into a nonproductive status has been on the rise and something needed to be done to stop the bleeding. Nonproductive lots is what is unfair to other property owners. We get zero revenue for these and have to continue to pay taxes so it becomes a double hit on our financials. Thankfully, the POA database provided enough detail that the lots which are most marketable could be identified, priced, and provided to the real estate community for sale, thus making them productive and revenue-generating. Mr. Simpson seemed to indicate that the 50% commission was what was unfair. Let’s dissect that theory by using pure numbers. Prior to January 1, 2021, it was not unusual to see a POA lot sold for $2,500 or less. In the real estate commission world, the minimum commission typically charged for a lot listed on the MLS was $1,500. Those in the real estate industry know that using that number what was likely to happen was that one broker listed the property and likely another would wind up selling it. So, the $1,500 gets split and $750 goes to each brokerage. For ease of calculations, let’s assume that the agent has a 50/50 split with the broker. That means for processing this transaction, the agent will receive $325 when the lot closes. For those attempting to make a living in the world of real estate, these kinds of results don’t rise to a level where agents are going to be pursuing the sale of lots
Under the revised lot program, the lots are now priced by a team of real estate professionals who are active in the business and the target was that lots wouldn’t be listed for anything less than $5,000. It was also agreed to stimulate interest and the sale of these lots that the commission structure must make it worth the agents’ time to pursue the sale of lots. It is now in the best interest of the real estate community to sell these lots at absolutely the highest price possible. Their commission is based directly on their ability to get premium prices where they can. And it is working. Figures show that through March of 2020 exactly zero POA-owned lots had been sold. Through March of 2021, 29 have been sold (10 of those by Realtors).
So based on what was being done previously, besides what I have pointed out above, let’s see how the finances work out:
Old – $2,500 lot sale; $1,500 commission to real estate community = $1,000 to POA
New – $5,000 lot sale; $2,500 commission to real estate community = $2,500 to POA
So, while I understand that those in the business of selling lots might see this as unfair competition to their personal efforts, the very fact that a program that places a higher value on lot sales should be one applauded instead of condemned. Additionally, if those who own lots wanted to engage the real estate community in moving their inventory, they have the option of taking similar actions to have the real estate community sell or push their inventory.
Lot sales will hopefully result in more new builds which help the Village. Also, if we have a liability lot in our inventory, shouldn’t we be doing everything we can to take it off the books as a liability?
Click here to read the Hot Springs Village Voice article written by Lewis Delevan and titled, “Village says 50 percent commission unfair to lot owners.”
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