Glad to have you on board leaving comments! Believe it or not, I used you in a presentation the other day as an example of an agent who was using very effectively using some of the web2.0 sites for cost-effective brand-building and marketing. If I was going to start marketing an agent today, I’d probably latch onto one of the existing platforms like flickr, MySpace, or Judy’s Book just as you have done!

Typically you can expect the client that is going to wait it out to be a bigger cost drain on the agent because more advertising must be done – and advertising isn’t cheap. Even if you use primarily online advertising there is still the hourly rates of assistants and/or website staff that must be paid to continue posting in all the places you’d expect a house to be shown besides just the MLS. Also, there might be extra services an agent provides which takes their time and/or money. When we put together our business plan for my team there is always a discussion of the expected profitability that we intend to achieve and we certainly target that by what a full listing fee is to our clients because we don’t do dual agency – so already off the bat we base our business on only a portion of any sale commission. There are also the occasional referral fees that can range from 10-35% depending on the source. Occasionally there is pressure to pay for things for the client if we get into a sticky situation in closing and we usually look at these situations as business decisions that if they still allow us to hit our profitability targets they’re worth considering or negotiating with our client or others involved in the transaction.

The difficult thing for me in reading all of these threads is that all the folks involved in the discussion act as though these fees are static and there is very little that impacts them besides the possible split with a broker. Running a solid real estate business (as an agent) is much more than that – although unfortunately more of my colleagues don’t see it that way – particularly the part timers and the ones that got the license “just in case” someone they knew needed to buy or sell a home. And don’t get me started on the novices that say they can help with investment property than can barely do math. The level of professionalism in our industry needs to be brought up to a higher standard.

Charles Schwab is the prototypical example: the company saw a huge unexploited niche in offering stock trades for $29.95 instead of, say, the $100 charged by the Morgan Stanleys of the world. Morgan Stanley’s execs weren’t dumb by any means; they obviously saw that there were a lot of people who wanted $29.95 trades, but were afraid that a lot of their $100 customers would defect.

After Charles Schwab developed a profitable business at the $29.95 level — and had developed millions of client relationships — some of their clients wanted more than the minimal service Schwab could offer at that price. What did Schwab do? They moved up-market as their $29.95 clients got wealthier and wanted more traditional, personal Morgan Stanley-ish service. Now Schwab has a range of offerings from their lowest level of service (which is now at $9.95 per trade or thereabouts) ranging to fuller service high-touch brokerage.

The point is that offering a differently-priced product is much easier if you’re starting at the lower end and moving upwards than vice versa. If Glenn Kelman were to divulge Redfin’s 20-year business plan, I suspect it would include eventually offering traditional high-touch spend-Sunday-afternoon-in-a-car-with-your-clients real estate brokerage services…at the traditional fee. The ideal client for this service? Simple — that would be satisfied previous Redfin clients who are now at a different stage in life and income and just don’t want the hassle of finding their own home.

I disagree. I think the key issue to understand is that the traditional BROKERAGE firms are in the landlording business. Their customer is the agent (as Keller Williams puts it so eloquently in their recruiting ads: “It’s all about you!”) and they compete with each other in attracting and retaining agents, who in turn own the customer connection. The customer doesn’t really care which firm the agent hangs his/her license.

So.. the traditional brokerage firms are truly in a bind. a) they cannot lower their commissions as a matter of policy, since every agent would jump ship (well not every, but most) and join another company where they can still charge their 5, 6 or 7%. b) they can hardly fire 90% of their independent contractor agents and shift their business focus to lead generation and transaction processing and support and tell their remaining 10% agents to now work on salary plus some bonus. It’s just not their business model.

In my opinion it will be a bloody mess for the traditional firms as this paradigm shift takes place. Most people don’t understand how rapidly entire industries can be wiped out. But a word of caution: It only took 2 years for the CD to displace vinyl records and it didn’t take much longer for Vonage & Co. to literally put every residential long distance company out of business. We’re talking a multi billion dollar industry that has shifted.

I completely agree with Ardell that in the final analysis the answer is to offer more option to the consumer and let the consumer make their choice. Surely what works for a $400K home is not necessarily appropriate for a $4MM home, and without a doubt, niches will develop. But let’s not kid ourselves, the writing is ‘on the wall’ so to speak. Everyone should read “tipping point”, now.

Thank you, thank you, thank you!!

I can tell you – without reservation – that offering services at a lower rate does not equal less service. The T’s are trying to suggest that the D’s are doing less…

Contrary, I can tell you that when I was running a team at RE/MAX charging 6 and 7% (when we could get it), we in actuality provided LESS service and LESS marketing than we do today at 3.99% with a listing side to us of 1.49%. So, we are charging half and doing more. How is that possible? Well, by making service delivery systemized and standardized, and by radically changing the compensation structure. Our listing specialist no longer get paid a 50% commission. He gets paid a salary plus 5% bonus, equating to approx. 10% of the 1.49% commission. But he takes 2 listings a day (he has nothing to do with marketing, just goes to a preset appointment), then turns in the paperwork, and a dedicated (licensed) listing coordinator = customer service rep takes over and manages that listing through the sale. The level of service we can provide with our system is far better than anything individual listings agents ever could. And this is just part of the story.

Now take off your mask

I totally agree with everything you said. Now stop calling it a “rebate” or a “discount” and call it what it is. A commission negotiation with YOUR CLENT!! and then we say BINGO!!!!

Good point. The behind the scenes learning is worth money as well. Or all that prospecting work that takes so much time but nobody sees.

The plumber charged $1 for tightening the bolt, but he charged $59 for knowing WHERE to tighten.

No, it’s not always 6%, and I do give rebates very often. I know you’ve been dying to hear me say that

If I listed a million dollar home, I’d probably drop down to 2% or 1.5%, whatever made business sense (I’m not experienced with such listings so can’t say for sure). Or if someone wanted me to make an offer one this one particular condo they really love, I’d probably give back a good chunk of my 3%, since it wouldn’t take much work.

All I was saying, it’s not always brute force work that makes a good agent. If I managed to sell a home in one week in a market where others take 3 months though, I think i would be worth more than 6% for pulling that kind of stunt.

Btw, I had an idea. Realtors should go through an apprentice stage to weed out the idiots. Kind of like inspectors and appraisers do. That way new agents would get to do some basic work right away, make some money, learn in the process, and it would immediately weed out the 1-deal-a-year soccer moms who don’t know what they are doing.