CRE N Illinois

Charitable giving program dips into broker referral fees, and brokers are thrilled

Charitable giving program dips into broker referral fees,ph1

It’s sometimes difficult to retain perspective, but real estate can be a lucrative business. In the first three quarters of 2018, real estate brokers in the United States made roughly $20 billion in commissions. There exists an easy mechanism to carve out some of that wealth and give it back to charity.

Investing in Communities (IIC) began as an experiment by Michael Pink and Sharon Porter, the husband-wife co-founders of MAP Real Estate. The simple idea was this: give a portion of the commission to a charity of the tenant’s choice.

“We wanted to differentiate our very small office tenant rep firm in what was a very crowded field,” Pink said. “We wanted to do it in a way that would give us something to feel good about instead of just a bunch of advertisements.”

It would be a way to both give back to the community and generate good will for the firm. Starting in 1995, every MAP Real Estate client was notified of the plan to donate 10 percent of each deal to charity. The number had to be a large enough percentage of the commission to have an impact on the charity because MAP Real Estate doesn’t close giant deals, according to Pink.

“We would introduce this to a charity that we were pitching to get their office tenant rep assignment,” Pink said. “They would, with some frequency, say a rather mild but expletive expression because they had never heard a broker talk like that before.”

Invariably, the prospective clients would speak to the brokerage that they had most recently used and those firms, in order to retain the business, promised to match the charitable giving. Now suddenly facing competition, the idea grew to scale the program up and have real, significant impact. That’s when IIC came about as a business program at MAP Real Estate until 2010 when it went live for the first time as a nonprofit entity on its own standing.

“We needed to identify any problematic issues and resolve them. We were dealing with something that has to work within the constraints of real estate license acts, it has to work within the constraints of what’s appropriate and feasible and legal in the world of charities,” said Pink. “We didn’t learn how to do any of what we’re doing except on the fly. It’s taken us a while to figure it out, but at this point we have the model pretty well refined.”

That model has changed from the early days and IIC is now consumer driven, not broker driven. The initial idea relied on brokers to recognize IIC as a way in which they could add a philanthropic component to their marketing repertoire.

“It turns out that brokers were not particularly interested in that. They were interested instead in getting referrals,” Pink said. “We can pick up the phone and call brokers, residential and commercial, anywhere in the country and ask a question that makes them giggle before they speak. That question very simply is, ‘would you like a referral?’ They always say yes.”

Rather than urging brokers to use IIC as a tool to get a leg up on their competition, the consumer-facing program instead refers clients to participating brokers and the charitable funds are gleaned from the referral fee.

“What I have learned is I can get any broker to eagerly agree to pay a referral fee that is significantly more than what they would ever think of giving, typically, if they were being charitable,” said Pink. “That’s one of the reasons that we’ve modified the revenue model instead of requiring brokers to make a pledge of 10 percent minimum of the commission, which is how we started.”

In Illinois, IIC has raised more than $265,000 for local charities. For example, healthcare access organization PrimeCare Community Health has received $30,000 to date and the pro bono legal organization Sargent Shriver National Center on Poverty Law has received over $36,000.

Many of the charitable funds have resulted from single-family home sales, but the program works for commercial real estate transactions as well. In fact, the size of CRE deals can have a much more impactful effect. IIC has given away roughly $600,000 since its inception; though the number of total deals were residential, approximately $500,000 of that total came from commercial transactions.

The largest number of transactions will probably continue to be residential, but IIC represents something of real value to companies that it doesn’t represent at all to individuals. As part of its corporate social responsibility, a company donate goods or services or employee time to a particular nonprofit.

“Companies do that because it’s very good for business. That doesn’t make it a bad reason that that’s why they do it. It makes it fundamentally sustainable,” said Pink. “With IIC, a company can fund the charity that aligns with a corporate brand or that the employees choose at zero corporate expense.”