Tracking Performance: Real Estate KPIs To Determine Agent Success
If you want your brokerage to succeed in a competitive real estate industry, you need to set and track key performance indicators (KPIs) for your agents.
Not only does tracking certain real estate metrics help you gain a better understanding of how your agents are performing, but it also assists you in generating a stronger bottom line.
Knowing which metrics to track and how to decipher each of them can be challenging.
In this article, we’ll discuss five metrics that you can use to track the performance of your real estate agents. We’ll also explain how each of these KPIs affects your bottom line.
1. Monthly Production
Agent productivity is a vital metric to track. It’s the metric most directly related to your bottom line—company dollar.
The number of closed transactions that each agent completes contributes to your total revenue.
This is true whether your agents pay a flat fee to your real estate agency or whether they’re on traditional splits.
Annual production is also an important metric to consider. As it’s not a number that is reported on frequently, it’s often not as useful for determining monthly expenditure changes throughout the year.
Instead, track monthly production both month-over-month and year-over-year.
If an agent performs better in the same month of each year, it’s a generally good indicator of their skill development as they’re reaching the same targets.
This approach also helps to predict production changes due to seasonality or other consumer trends.
It’s not always possible to pull year-over-year data when you have new agents who have been with your company for less than 12 months. In this case, track month-over-month production while keeping typical seasonal trends in mind.
➡️ How monthly production impacts your bottom line
Most brokerages have a variety of agents: full-time, part-time, and producing admins. Each type of agent has a cost to the real estate office. Monthly production, or the lack thereof, is the clearest way to see which agents cost the most.
Consider the primary source of revenue: total company dollar. If you only charge a flat fee, you’re not making any money when agents aren’t producing—you’re in fact losing money because you’re still paying to allow them access to your tools and infrastructure.
The same holds true for agents working on commission splits. You may make more from each of their closed transactions, but the cost needs to be evaluated against the expenses associated with supporting them.
Take software, for example. Many tools for real estate charge per-user fees and require long-term contracts. This is an expense your brokerage must cover so that agents can use this software.
2. Days on Market (DoM)
The second metric to track closely is the time that agents’ official listings remain actively listed on the real estate market— referred to as days on market (DoM).
Days on market is simply the number of days the property is listed for sale on the multiple listings service (MLS) before it’s under contract.
Often, this can indicate an area of quick improvement. Once you have a clear idea of days on market for each agent, consider why some have properties listed on the market longer than your top achievers.
A higher-than-average number of days on market is a metric to watch over time. However, it’s not necessarily a critical sign of an underperforming agent. Seasonality generally plays a role in days on market, as will other changing market conditions.
After having considered all relevant factors, a higher-than-average days on market metric may still be a sign that an agent needs support to improve.
➡️ How days on market impact your bottom line
Active buyers and real estate investors move quickly when the right property lands on their radar.
However, when buyers begin seeing the same listing for sale, they tend to assume something may be wrong with the asking price, the location, or even the condition of the property.
Whether a high number of days on market is due to one or all of these factors, it generally requires the asking price to come down—which affects the total commission.
Understanding this metric will help you identify agents who need coaching and support.
Consider additional mentoring or supportive measures to improve their ability to conduct comparative pricing, understand marketing strategies, and develop negotiation skills.
3. Sale Price vs. List Price
Similar to days on market, the difference between the list price and the final purchase price (sale price) is another key metric to measure performance on a monthly basis.
A price that needs to be lowered to get real estate sold doesn’t look good and often means that the property becomes stale.
On the other hand, pricing a property too low means you’re leaving money on the table—in which case your company, your agent, and your client miss out.
The best agents can determine a price that both garners attention and doesn’t leave money on the table.
Generating reports that help you track the average sale price versus the initial list price is a clear way to see which agents need support and additional help.
➡️ How average sale price vs. list price impacts your bottom line
Determining the right list price can take time. It also often takes practice to master. However, none of this time is free of charge.
Understanding this metric on an agent-by-agent basis will help you coach agents in the most effective way.
To save time and help develop your agents’ skill sets quickly, focus on the various aspects of the process:
- Pulling comparable listings and recent sales.
- Reviewing withdrawn and expired history.
- Checking out current transactions that are pending.
- Considering current market trends.
4. Sales Volume
Sales volume is a prevalent metric of success—and one that’s often associated with ability. Real estate agents and brokerages alike use sales volume as a way to demonstrate their influence and performance.
An agent’s sales volume is simply the total value of all closed transactions by sales price. As a number reported annually, this value is often glamorized, but it’s not always a very accurate metric of company or agent performance.
Consider two agents: The first agent closes 50 deals a year, and another agent closes 25.
When you take other relevant factors into account, either agent can be the top contributor to your company dollar.
The sales price, their commission plan, and your expenses all play a vital role in contextualizing the sales volume number and how it impacts your company.
➡️ How sales volume impacts your bottom line
Understanding sales volume as a metric for success means you need a clear understanding of how your brokerage makes money.
If you don’t understand this completely, sales volume becomes a vanity metric that can lead to less-than-ideal decisions about coaching and investment.
For example, a flat-fee brokerage is often more concerned with the number of closings than with the total sales volume, while a traditional split brokerage makes a direct percentage of the sales volume.
However, if you allow sales volume to become the metric that agents look at to improve on, many will ultimately chase fewer deals with more significant payouts. Consider these factors when setting agent goals and negotiating commission plans.
5. Pending Commissions
Of all the real estate agent performance metrics to track, pending commissions are one of the most important ones for any brokerage.
Pending commissions will help you forecast future revenue and make decisions based on what’s in the pipeline.
Calculating pending commissions is done differently based on the way in which your brokerage makes money.
For example, in flat-fee brokerages, the pending commission is most often your transaction fee multiplied by the number of pending deals. There may be additional fees collected as well, and considering each in the same calculation is relatively simple.
Calculating pending commissions for a traditional split-based brokerage can be a little more complex.
The commission percentage, referral fees, franchise fees, client fees, deductions, and other percentage-based fees will all need to be considered to calculate an accurate value of pending commissions.
➡️ How the total commission generated impacts your bottom line
The value of the pending brokerage commission is the most important metric to measure as it relates to your bottom line. This is because it reflects the bottom line for a period of time in the near future.
Knowing this value can help determine how much money you have available to invest in recruiting, creating brand awareness, or hiring a new admin, for example.
To stay up-to-date with pending commissions, it’s ideal to run weekly reports that aggregate your pending inventory across locations and teams.
You can make this metric even more useful by comparing the figure to the same time period in the previous month or the prior year. Doing so will help normalize the data and take into account seasonal trends.
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