So many recent articles and posts have focused on these “new” real estate practices and how they are all reducing commissions, going to drive the stodgy old guard out of business and revolutionize the industry. I’ve also both read and listened to a lot of “traditional
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It seems clear that Robert and other agent posters on this board have lots of experience in the business. From what Robert is saying, experienced agents who try to compete on price are missing an important tool in their arsenal – the art of negotiation. That may be true in many cases. Someone strong in most real estate agency skills (good client service, excellent marketing skills, attention to detail, knowledge of transaction mechanics) may lack the confidence or skill to make the case for a full priced commission.
In this case, Robert is correct.
However, for new agents, such as myself, with no track record to which to point, experience and establishing a track record is everything. When I get a referral from a friend, one of the business building tools in my belt is the negotiation of price. Why are so many agents so dead set against this tactic? The only answer is one linked to collusion – the fear that newer agents, or agents lacking negotiating skills – whomever – will drive down the average industry commission.
Granted, the bigger reasons for this pressure are linked to the firms mass marketing discounted fees. Of course, standing behind them is the technology that has reduced overhead and has empowered these newer business models. And as Robert has said, there’s a market for these models.
However, if an individual agent, such as myself, can successfully build a business using the art of the discount in his toolbelt (along with great customer service, negotiation skills, etc.), then why all the criticism? Have more experienced agents developed such staggering overhead that any discounting at all will push their operating income into the red?
I have no regrets or hesitations in using discounts in the early stages of building my business. As I get in the door, winning business from more experienced agents on price, while delivering a level of service and perceived value beyond the discounted rate, referrals will come, and as I have found so far – and this is the key – these referrals are based on my service, NOT on price. At some point, I’ll be able to discount less, but I would never set aside this tool, since it still has a place even with established agents, in my opinon (volume clients, etc.).
So what is it with experienced agents? Don’t be hating? In theory, if newbie, fly-by-night agents competed solely on price, and had no other supporting skills (which I feel I bring through my other career and life experiences, and from my real estate investment experiences), they would get ground up, since poor service and a poor experience are never forgotten, if the value delivered doesn’t meet expectations of the cost. These types of agents won’t get referrals, and their business will dry up.
Look, it’s a zero sum game. If I don’t get a client looking for an agent, another agent will. And based on my profile as an agent, at this moment, the discounted commission gets me the client, and my service keeps the client.
Robert, great topic.
I think to start, differentiation must be key. When I interviewed a few agents from the big four local firms, differentiation was non-existent. It was lipstick, just a different color. All seemed to focus on the DNA of real estate– the power of the MLS. If, right away, there was an agent that was meaningfully less costly, that is a huge differentiator for consumers.
How do agents get commissions or price out of the brains of consumers and sell services? I don’t know that you can.
Money is tangible and meaningful to consumers, whereas perception of services is a tougher sell. It’s enough to drive loan officers nutty when consumers ask continually what rates are, points, closing fees etc…
SeattleEric mentioned that he takes away the money objection right off the table. I would think that he would have quite a number of interested parties willing, no EAGER, to listen to him. Everyone is looking for a good price on things, but it’s much more magnified when you add some zero’s to the equation when selling or buying homes.
It’s ironic that the drum beat is to focus on service and yet the first question the agents or loan officers our staff meet is “what’s your fees?” I think as alternatives continue their entry into the market, people will be more willing to go shopping for something that suits their needs and makes sense to the wallet. But first, they must know that alternatives exist.
Eric
Your post about newer agents working for less brings up an interesting issue. Take other professional services (e.g. law or accounting). Sure, the usual compensation scheme is different (hourly vs. success-based) but a new lawyer or accountant will certainly not charge the same hourly rate as a seasoned veteran. Why, because they are not as competent, not as efficient and not as knowledgeble about how to get the job done. Does the same hold true for real estate agents, at least as to the competency, efficiency and knowledge?
In real estate, should a new agent fresh out of the DOL test room charge the same rate as one who has closed 50 deals? One might argue that it doesn’t matter since the commission is success-based and if the new agent gets a deal closed, they have served their client with the same competence, knowledge and efficiency as the veteran agent. Is this true?
Back to the law analogy. There are times when someone comes to me and asks me to perform a task that would be far better performed by someone who charges much less than I. The task is relatively straightforward and a junior atty charging much less per hour could do a fine job. I will tell the prospective client that they should not use me because I will end up overcharging them. Are there analogous situations in real estate brokerage?
Russ
Eric
Your post about newer agents working for less brings up an interesting issue. Take other professional services (e.g. law or accounting). Sure, the usual compensation scheme is different (hourly vs. success-based) but a new lawyer or accountant will certainly not charge the same hourly rate as a seasoned veteran. Why, because they are not as competent, not as efficient and not as knowledgeble about how to get the job done. Does the same hold true for real estate agents, at least as to the competency, efficiency and knowledge?
In real estate, should a new agent fresh out of the DOL test room charge the same rate as one who has closed 50 deals? One might argue that it doesn’t matter since the commission is success-based and if the new agent gets a deal closed, they have served their client with the same competence, knowledge and efficiency as the veteran agent. Is this true?
Back to the law analogy. There are times when someone comes to me and asks me to perform a task that would be far better performed by someone who charges much less than I. The task is relatively straightforward and a junior atty charging much less per hour could do a fine job. I will tell the prospective client that they should not use me because I will end up overcharging them. Are there analogous situations in real estate brokerage?
Russ
Russ:
You make an interesting point. In Law, as you say, not every lawyer is equal, due to area of specialization and experience – there’s a certain path an attorney takes. It’s either structured – as in working one’s way up through a large law firm, or entrepeneurial – such as opening one’s own law practice. Both has advantages and disadvantages to the client and the attorney choosing such a path, I imagine.
The only similar path in Real Estate sales that I can think of (and I defer to the more seasoned agents to fill out my sketch) would be either licensed agents taking salaried positions with established agents/brokers, or choosing a highly structured brokerage franchise where newbie agents start out at the bottom of the totem poll, both in terms of responsibilities (desk duty) or financially (splits heavy towards the brokerage).
On the other hand, I’m one of those heady law graduates who just don’t feel they would fit into the big law firm culture or politics. I’m the guy who opens his own law practice, and takes any business he can get, at a price marketed to attract folks who don’t want to pay/or can’t afford to pay the big firm’s prices.
At some point, success will be a network of affiliated attorneys in multiple states, from whom I get a referral fee everyone calls my 1-800-LETMESUE as seen on my commercials running every 10 minutes during the Maury Povitch, Jerry Springer, and various Judge (fill in the blank) shows. 🙂
Russ:
You make an interesting point. In Law, as you say, not every lawyer is equal, due to area of specialization and experience – there’s a certain path an attorney takes. It’s either structured – as in working one’s way up through a large law firm, or entrepeneurial – such as opening one’s own law practice. Both has advantages and disadvantages to the client and the attorney choosing such a path, I imagine.
The only similar path in Real Estate sales that I can think of (and I defer to the more seasoned agents to fill out my sketch) would be either licensed agents taking salaried positions with established agents/brokers, or choosing a highly structured brokerage franchise where newbie agents start out at the bottom of the totem poll, both in terms of responsibilities (desk duty) or financially (splits heavy towards the brokerage).
On the other hand, I’m one of those heady law graduates who just don’t feel they would fit into the big law firm culture or politics. I’m the guy who opens his own law practice, and takes any business he can get, at a price marketed to attract folks who don’t want to pay/or can’t afford to pay the big firm’s prices.
At some point, success will be a network of affiliated attorneys in multiple states, from whom I get a referral fee everyone calls my 1-800-LETMESUE as seen on my commercials running every 10 minutes during the Maury Povitch, Jerry Springer, and various Judge (fill in the blank) shows. 🙂
Boy, the heat is getting to me…that last post seemed to lose focus quickly. Sorry. I wish we had AC. And tomorrow is only going to be worse. Oyvay.
Tim,
there definately will be those clients who are focused on price which is why I think there is a market for the discounters. But there are also those clients who recognize the benefit of professionalism — both in marketing the home and managing the transaction.
Case in point was a home I listed last winter in Snoqualmie Ridge. The couple that owned this home was a techie executive and a real estate attorney. They certainly didn’t need my limited legal skills (filling in forms folks — that’s what we are limited to). Nor was selling a home a new experience for them — they sold their 2 previous homes FSBO. However, they have both progressed to the point in their careers that they simply did not have the time to market the home, show it to would be buyers, hold open houses or anything that goes with selling a home.
When I met with them I focused on the issues. What’s your biggest concern? (selling quickly in this case) What services did the “other guys” offer. Did they have a complete marketing plan and calendar? No, but I did. Did they have a media action plan that included print, website and targeted pay per click advertising? No, but I did. I could go on but I think I’ve made my point.
Does this mean I’m the perfect realtor for everyone? Probaly not. Some people like the do-it-yourself of FSBOs, others want nothing more than the “get me on the MLS” service. But compare the side-by-side of the specific services and decide if the discount is worth it.
Which leads me to ask all the lawyers out there — how well off would everyone be if they picked a lawyer based upon thier hourly rate.
Tim,
there definately will be those clients who are focused on price which is why I think there is a market for the discounters. But there are also those clients who recognize the benefit of professionalism — both in marketing the home and managing the transaction.
Case in point was a home I listed last winter in Snoqualmie Ridge. The couple that owned this home was a techie executive and a real estate attorney. They certainly didn’t need my limited legal skills (filling in forms folks — that’s what we are limited to). Nor was selling a home a new experience for them — they sold their 2 previous homes FSBO. However, they have both progressed to the point in their careers that they simply did not have the time to market the home, show it to would be buyers, hold open houses or anything that goes with selling a home.
When I met with them I focused on the issues. What’s your biggest concern? (selling quickly in this case) What services did the “other guys” offer. Did they have a complete marketing plan and calendar? No, but I did. Did they have a media action plan that included print, website and targeted pay per click advertising? No, but I did. I could go on but I think I’ve made my point.
Does this mean I’m the perfect realtor for everyone? Probaly not. Some people like the do-it-yourself of FSBOs, others want nothing more than the “get me on the MLS” service. But compare the side-by-side of the specific services and decide if the discount is worth it.
Which leads me to ask all the lawyers out there — how well off would everyone be if they picked a lawyer based upon thier hourly rate.
Eric,
What’s your prior work experience? Education? Build on what you offer. If you really want to pick something to offer them as to why they should take a chance on you, offer them a guarantee of your services.
I’ve only been in real estate for a little over a year so I don’t try and snow anyone that I’m the most :experienced real estate agent” around. But I do emphasize my 15 years experience in sales and marketing as well as starting 2 successful consulting practices. On top of that my services are guaranteed. If they feel they didn’t get the service they paid for my commission will be refunded. Period.
So spend some time with your friends and previous co-workers. I’m sure you can come up with more to negotiate than price.
Eric,
What’s your prior work experience? Education? Build on what you offer. If you really want to pick something to offer them as to why they should take a chance on you, offer them a guarantee of your services.
I’ve only been in real estate for a little over a year so I don’t try and snow anyone that I’m the most :experienced real estate agent” around. But I do emphasize my 15 years experience in sales and marketing as well as starting 2 successful consulting practices. On top of that my services are guaranteed. If they feel they didn’t get the service they paid for my commission will be refunded. Period.
So spend some time with your friends and previous co-workers. I’m sure you can come up with more to negotiate than price.
Robert:
Great point. And let me be clear, if I can get 3%, believe me, I’ll try. However, the point I’ve been trying to make is why 3%? Because it has been that way for years, does it make it untouchable? Why 6% in the first place? Who deemed that to be fair compensation? This goes (in part) to the whole collusion controversy going on. At some point, everyone latched onto 3% and built their businesses around it. At the time, before the Internet, before technology (my god, how did agents survive without cell phones in the old days!), 3% was probably fair given the massive legwork required to search out buyers and get exposure to a seller’s property.
Today, all those hardships have gone away. The big brokerages organized, in part, to scale the way selling and buying was done before technology, and 3% was probably needed to make the efforts worthwhile.
But today, wouldn’t you agree that with all the tools and resources available, a 2% listing commission represents the work that agents did with 3%, 20 years ago?
One of the best things about being a real estate agent is that there’s room for an infinite variety of business models. Want to charge top dollar, percentage-wise, for your vast array of high-quality services? Go ahead. Want to charge a minimal fee for fewer services? Go ahead. Want the freedom to negotiate on a case-by-case basis, as appropriate to each client’s unique needs? Go ahead.
What’s more difficult to grasp is the mentality of some (usually the so-called name-brand “full-service” brokerages affiliated with NAR) that everyone else must follow their socially-acceptable business model.
That’s called Fundamentalism…believing that your way is the only way, and anyone who strays outside your narrowly-defined set of guidelines or interpretations is somehow inferior and worthy of professional, if not personal, condemnation.
If you want to work for JLS or Windermere, or CBB, or ReMax, or whomever else, and you want to do their NAR/full-service/full-commission thing, great – go for it! I sincerely hope it works for you.
But please allow me the freedom to succeed on my own merits, in my own way, free of your definitions – and judgements – of what constitutes service, value, and success.
One of the best things about being a real estate agent is that there’s room for an infinite variety of business models. Want to charge top dollar, percentage-wise, for your vast array of high-quality services? Go ahead. Want to charge a minimal fee for fewer services? Go ahead. Want the freedom to negotiate on a case-by-case basis, as appropriate to each client’s unique needs? Go ahead.
What’s more difficult to grasp is the mentality of some (usually the so-called name-brand “full-service” brokerages affiliated with NAR) that everyone else must follow their socially-acceptable business model.
That’s called Fundamentalism…believing that your way is the only way, and anyone who strays outside your narrowly-defined set of guidelines or interpretations is somehow inferior and worthy of professional, if not personal, condemnation.
If you want to work for JLS or Windermere, or CBB, or ReMax, or whomever else, and you want to do their NAR/full-service/full-commission thing, great – go for it! I sincerely hope it works for you.
But please allow me the freedom to succeed on my own merits, in my own way, free of your definitions – and judgements – of what constitutes service, value, and success.
I really like what Gordon and Eric said, and I’m glad that some agents that think that way. I consistently argue that if traditional agencies want to be a major part of the future, they need only to get on the stick with some innovations of their own. They can’t compete solely on price, nor should they. There are plenty of thriving businesses that aren’t in a race to the bottom on cost. But they differentiate themselves and innovate. I can’t, for the life of me, understand why the NAR is so short-sighted!
I feel that if consumers could continue work with a traditional agency but pay a flat fee, or there was a sliding scale for listing fees (decreasing the percentage) as the value of your house rose, most people would be all over it. Why go the “DIY” route and take on risk/effort if the difference is only 1%? But when the difference is 2%, ($25,000+) it’s a lot harder to justify the “service” you’re getting. Especially when there are alternatives (like those that list you on the MLS and provide closing support) that don’t require total “FSBO” effort levels.
Agencies should come up with a “menu of services” – with options that range in cost/service from just above the discounters for minimal help to high-cost, “we do everything for you”. While you’re at it, eliminate the collusion and conflict of interests (where you penalize discount brokers by denying them MLS access or fail to show buyers a house because your commission would be mildly reduced). Then agents and agencies should market themselves like robert talked about (on service). Home buying and selling is serious business, and no homeowner (or prospective homeowner) I know wants to screw it up, So if you can offer them assurances and demonstrate value without bad-mouthing your competition, there’s a large number of people that would flock to you.
I’m fine with the NAR’s ethics and licensing programs. I like the idea of real estate licensing even being more beefed up, and I’d be willing to pay for a licensed professional if I felt it really go tme something. But lately the NAR is are reminding me of the BIAW in their inwardly-focused, self-serving political stances. Their credibility is rapidly eroding and I would happily stick with my agent if he left the NAR, or go to someone like Ardell, because of her length of experience. NAR membership is not a automatical seal of approval anymore.
I really like what Gordon and Eric said, and I’m glad that some agents that think that way. I consistently argue that if traditional agencies want to be a major part of the future, they need only to get on the stick with some innovations of their own. They can’t compete solely on price, nor should they. There are plenty of thriving businesses that aren’t in a race to the bottom on cost. But they differentiate themselves and innovate. I can’t, for the life of me, understand why the NAR is so short-sighted!
I feel that if consumers could continue work with a traditional agency but pay a flat fee, or there was a sliding scale for listing fees (decreasing the percentage) as the value of your house rose, most people would be all over it. Why go the “DIY” route and take on risk/effort if the difference is only 1%? But when the difference is 2%, ($25,000+) it’s a lot harder to justify the “service” you’re getting. Especially when there are alternatives (like those that list you on the MLS and provide closing support) that don’t require total “FSBO” effort levels.
Agencies should come up with a “menu of services” – with options that range in cost/service from just above the discounters for minimal help to high-cost, “we do everything for you”. While you’re at it, eliminate the collusion and conflict of interests (where you penalize discount brokers by denying them MLS access or fail to show buyers a house because your commission would be mildly reduced). Then agents and agencies should market themselves like robert talked about (on service). Home buying and selling is serious business, and no homeowner (or prospective homeowner) I know wants to screw it up, So if you can offer them assurances and demonstrate value without bad-mouthing your competition, there’s a large number of people that would flock to you.
I’m fine with the NAR’s ethics and licensing programs. I like the idea of real estate licensing even being more beefed up, and I’d be willing to pay for a licensed professional if I felt it really go tme something. But lately the NAR is are reminding me of the BIAW in their inwardly-focused, self-serving political stances. Their credibility is rapidly eroding and I would happily stick with my agent if he left the NAR, or go to someone like Ardell, because of her length of experience. NAR membership is not a automatical seal of approval anymore.
Great counter point. The industry is more than big enough to support mulitple business models. If you can’t compete on price, do a better job on competing on quality of service. The tricky part is that you often have to do business with people who have different business models. Every other industry I can think of only has one sales-person involved in the the transaction. Real estate almost always has 2 sales-people (which why the status quo is hard to change).
Also be thankful, that at least in this industry, the “discounters” don’t give away their services. If Microsoft can become a $50 billion / year company (and grow) in the face of free software, you can compete against a discounter.
Robert,
Are you calling anyone who doesn’t charge 3% “a discounter”. Where do you draw that line between “discounters and non-discounters”.
Doesn’t the word “discounting” equivocate “price fixing” by suggesting that any business model that does not charge exactly at “your definition of full rate” equals a “discounter”?
If you charge 3% and I charge 3% less $100 bucks, does that make me a “discounter” by your definition? If not…when exactly does the term “discounter” kick in, by your definition of the term in the subject line of this post? Is 2.5% a “discounter”. Is 2% a “discounter”…is $1,000 cashback on a $900,000 sale a “discounter”.
I know you can’t answer, but do understand that freely throwing the term “discounter” around, infers that there is a “fixed rate” and so using the term “discounter” in and of itself, suggests “price fixing”.
Robert,
Are you calling anyone who doesn’t charge 3% “a discounter”. Where do you draw that line between “discounters and non-discounters”.
Doesn’t the word “discounting” equivocate “price fixing” by suggesting that any business model that does not charge exactly at “your definition of full rate” equals a “discounter”?
If you charge 3% and I charge 3% less $100 bucks, does that make me a “discounter” by your definition? If not…when exactly does the term “discounter” kick in, by your definition of the term in the subject line of this post? Is 2.5% a “discounter”. Is 2% a “discounter”…is $1,000 cashback on a $900,000 sale a “discounter”.
I know you can’t answer, but do understand that freely throwing the term “discounter” around, infers that there is a “fixed rate” and so using the term “discounter” in and of itself, suggests “price fixing”.
As is often the case, Ardell raises a salient point here: what exactly is a “discounter” and at what rate/price/commission % does an agent become a “discounter.”
I would add that the repeated use of the term “discounter” in and of itself – which not coinicidentally is almost always used by “full price” agents and/or brokers as a term of derision – represents a bit of a slur on a professional level.
This goes back to my previous point about Fundamentalists (in whatever field of endeavor) attempting to define – and thus limit – the overall discussion to the terms they approve of, by labelling anything outside their guidelines as somehow unacceptable. This type of argument immediately puts the person/agent/party being labelled on the defensive – as if they now need to explain or justify their behavior.
This is not so much aimed at Robert, who frequently contributes some interesting and informative posts here…it’s more the prevailing mindset or argument reflected in his contribution to this discussion.
Hi Ardell,
I’m not defining what a discounter is at all. My biggest point is there is room in the market place for FSBO’s, discounters and full-service agents. Let’s all stop denegrating each others business model. If you are high-end rate agent, be prepared to negotiate and defend your position based upon the merits of your service. If you are a low-fee agent appealing to the low cost issue clients, that’s fine too. Which ever your model if you want to succeed concentrate on the clients needs and not your competitions business model.
I’m just tired of hearing some people complain about how “unreasonable” the fees are for those companies that do charge the higher rates — often times their record justifies it. But I’m also equally tired of hearing people bemoan the Redfin’s and other internet business models — it’s innovative and the right fit for some clients.
On another note, I was particularly hoping to hear your insight on my sidebar note. I imagine you’ve been through enough turns in the market to offer some insite on the pressure of commission rates as the market changes in the other direction.
Cheers,
Robert
PS: My definition of a discounter is anyone who markets themselves on the premise “go with us because we’re the cheapest”.
Hi Ardell,
I’m not defining what a discounter is at all. My biggest point is there is room in the market place for FSBO’s, discounters and full-service agents. Let’s all stop denegrating each others business model. If you are high-end rate agent, be prepared to negotiate and defend your position based upon the merits of your service. If you are a low-fee agent appealing to the low cost issue clients, that’s fine too. Which ever your model if you want to succeed concentrate on the clients needs and not your competitions business model.
I’m just tired of hearing some people complain about how “unreasonable” the fees are for those companies that do charge the higher rates — often times their record justifies it. But I’m also equally tired of hearing people bemoan the Redfin’s and other internet business models — it’s innovative and the right fit for some clients.
On another note, I was particularly hoping to hear your insight on my sidebar note. I imagine you’ve been through enough turns in the market to offer some insite on the pressure of commission rates as the market changes in the other direction.
Cheers,
Robert
PS: My definition of a discounter is anyone who markets themselves on the premise “go with us because we’re the cheapest”.
The consumer is more educated about the process today than ever before, and they are doing a lot of research online. I think most people want the help of a real estate professional but they don’t want to pay the historically high commissions.
So what about Option 3- Full representation with a very good, experienced, full time Realtor who has decided to charge a commission rate that is 1%.
The client would still be receiving a great negotiator and all the representation that you would provide AND at a lower rate.
Sounds like a win-win.
The consumer is more educated about the process today than ever before, and they are doing a lot of research online. I think most people want the help of a real estate professional but they don’t want to pay the historically high commissions.
So what about Option 3- Full representation with a very good, experienced, full time Realtor who has decided to charge a commission rate that is 1%.
The client would still be receiving a great negotiator and all the representation that you would provide AND at a lower rate.
Sounds like a win-win.
A “discounter” charges less than convention.
Firms that position themselves at the high end of the range are not “fundamentalists.” They are branding their product.
Apple computer. Whole Foods. Walmart. Target.
Would you describe any of these brands as discounters?
If your product is superior, why charge less?
I guess if you can’t evaluate quality and all agent’s appear equal, then price becomes a clear way to differentiate between agents.
This is one reason blogging is such an incredible resource for people shopping for an agent. It provides a window for understanding an agent’s expertise, communication style, ability to resolve conflict, etc.
A “discounter” charges less than convention.
Firms that position themselves at the high end of the range are not “fundamentalists.” They are branding their product.
Apple computer. Whole Foods. Walmart. Target.
Would you describe any of these brands as discounters?
If your product is superior, why charge less?
I guess if you can’t evaluate quality and all agent’s appear equal, then price becomes a clear way to differentiate between agents.
This is one reason blogging is such an incredible resource for people shopping for an agent. It provides a window for understanding an agent’s expertise, communication style, ability to resolve conflict, etc.
Gordon is absolutely right. We are not singling “Robert” out here, he is just the mindset that sets “traditional” and “discounter” as terms that “appear” to define, but actually elevate and degrade, respectively.
Robert asks Ardell:
“On another note, I was particularly hoping to hear your insight on my sidebar note. I imagine you’ve been through enough turns in the market to offer some insite on the pressure of commission rates as the market changes in the other direction. Cheers,Robert
PS: My definition of a discounter is anyone who markets themselves on the premise “go with us because we’re the cheapest
As someone that is just entering this field, I can only look at most of the posts and learn from them. All of the comments give me plenty of food for thought.
I would like to make this observation. While I am brand-spanking new to Real Estate, I do have somewhere in the neighborhood of 30 years in professional sales.
I learned a long time ago, that when I talk to someone as the”professional,” I try to express to the client/consumer/customer what I will be doing for her/him.
Regardless of product, I want to make sure that the client knows that I will be doing a lot of work on their behalf; in this case helping them buy or sell real estate. I have in the past, and I will, in the future, discuss that client’s needs first. Then provide enough input to that client to make him/her aware of what they can expect from me, and they can see the value in what I will be trying to do for them. It’s at that point that I can point out, what they can expect in the way of fees.
Maybe I’m just too new to know any better, but I feel justified in saying that the fee is X%. Does this mean that if that client says to me, “I’ll give you Y%, instead of X%,” I’m going to either blow them off, or negotiate a lower fee. Being honest, I just can’t answer that right now. Tune in for future developments. 🙂
As someone that is just entering this field, I can only look at most of the posts and learn from them. All of the comments give me plenty of food for thought.
I would like to make this observation. While I am brand-spanking new to Real Estate, I do have somewhere in the neighborhood of 30 years in professional sales.
I learned a long time ago, that when I talk to someone as the”professional,” I try to express to the client/consumer/customer what I will be doing for her/him.
Regardless of product, I want to make sure that the client knows that I will be doing a lot of work on their behalf; in this case helping them buy or sell real estate. I have in the past, and I will, in the future, discuss that client’s needs first. Then provide enough input to that client to make him/her aware of what they can expect from me, and they can see the value in what I will be trying to do for them. It’s at that point that I can point out, what they can expect in the way of fees.
Maybe I’m just too new to know any better, but I feel justified in saying that the fee is X%. Does this mean that if that client says to me, “I’ll give you Y%, instead of X%,” I’m going to either blow them off, or negotiate a lower fee. Being honest, I just can’t answer that right now. Tune in for future developments. 🙂
P. S. Some agents are charging premium fees for less than premium services, not because they don’t sometimes give premium level services, but because some people don’t need premium level services to get the job done. Why are they charged the same?
And don’t tell me it’s because “baby needs a new pair of shoes” 🙂
Joe, Joe…Say It Ain’t SO!! “Less than ‘convention’
” is just another way of saying “The price fixed by those who aren’t legally permitted to fix the price”! Hope you can see that.
Ardell,
maybe it’s Daddy needs a new car. 🙂
LOL…not a good answer, Robert.
Once, when I was working in Granite Bay CA, a “Realtor” said to me, “You can AFFORD to have the ethics you have, you have a husband that makes a lot of money!” I seriously thought maybe she was right at the time.
A few years later when I was totally flat broke in the middle of a divorce with my kids all sleeping on the floor or on two dining room chairs while we waited for a “temporary order of relief”, someone tried to hand me some money as a bribe in a multiple offer situation. I seriously didn’t know how we were going to eat dinner that day. It was that day I proved to myself that my ethics do not come from the status of my bank account.
Nor should what anyone charges a client depend on the status of their bank account.
I had this back and forth this morning with an agent. We were negotiating a sale and she kept talking about her husband and kids. What the heck do her husband and kids have to do with this buyer and this seller and this transaction coming together or not? Oh, SHE was a Professional…I mean Realtor. Sorry, the Devil made me do it.
When an agent won’t give up a dime, and I do mean ten cents, to make it happen for their client, after the seller and I have given and given until we are just plain done. When the issue of giving $50 to gain $18,000 and the house for the client falls on “NO, I won’t give $50 to make this work”…that is just plain…I ain’t gonna say it.
It’s OK to have a business model and standards Robert. It ain’t OK to be like a dog with bone when it negatively impacts the client during negotiations.
Ardell,
I don’t believe that having an office policy of x% is price fixing this has been discussed here a 100 times. I don’t believe that an agent having a personal standard of x% is price fixing. I think most agents know what the common commission is for their market and type of property being sold. I also believe that most agents have discounted at some point in their career whether it was selling a home to a friend, a family member or just wanted to take a deal away from another agent. So here it is my definition of a discounter.
Definition of Discounter:
A discounter is an agent/company who knowingly and purposely uses commission prices as their primary value proposition to compete with another agent or company.
Ardell I know you want me to but I don’t believe you are a discounter. I believe you are in your own personal Real Estate world :). I believe you have told yourself enough times what you want to believe, that you actually believe it to be true. Last thing for you Ardell, the seller absolutely pays the commission he even signs a contract saying he will pay the commission.
Ardell,
I don’t believe that having an office policy of x% is price fixing this has been discussed here a 100 times. I don’t believe that an agent having a personal standard of x% is price fixing. I think most agents know what the common commission is for their market and type of property being sold. I also believe that most agents have discounted at some point in their career whether it was selling a home to a friend, a family member or just wanted to take a deal away from another agent. So here it is my definition of a discounter.
Definition of Discounter:
A discounter is an agent/company who knowingly and purposely uses commission prices as their primary value proposition to compete with another agent or company.
Ardell I know you want me to but I don’t believe you are a discounter. I believe you are in your own personal Real Estate world :). I believe you have told yourself enough times what you want to believe, that you actually believe it to be true. Last thing for you Ardell, the seller absolutely pays the commission he even signs a contract saying he will pay the commission.
Ardell,
Will you help me understand your perspective with a concrete example?
Let’s say I want you to list my Kirkland condo. I am busy. I have a sweet job. I am a do it yourselfer in many ways. I am skilled at most things where I apply myself, but my time and energy are not best spent in real estate. It would take alot for me to get top dollar for my condo–and I would rather call in an expert.
I want to hire you.
What fee would you charge?
(I accept your premises that the existing conventions are arbitrary.)
I want your best service.
What will it cost?
Many agents label other’s as “discounters” because they charge anything less than the historical norm (we all know that number). And I think many times they use the term in a deragatory way because they feel threatened. Many agents do not want the consumer to know that commissions are negotiable.
Remember, 15 years ago commissions really weren’t negotiable. They were technically, but not in practice. Borkers dictated the rate and you didn’t really stray from it. And because the agents had all the information, the consumer had no real choice. Either pay that industry norm that we can’t say we had, or go FSBO and have nobody show (see) your home.
Today things are changing. The industry is evolving and today it’s because of the consumer. The “discounters” before were really only Help-U-Sell and Assist-2-Sell, which have never had good business models so they haven’t ever been significant. The discounting before was not driven by the consumer. It was really driven by the agents who felt they needed to discount to get any business- probably because they weren’t as good of agents. Today it’s driven by the consumer… that makes it different, and honestly better because the consmer should have that choice.
Oh, and Ardell- blueroof.com should be registered with NAR now- I know we’re registered with UAR (Utah Association of Realtors)
Many agents label other’s as “discounters” because they charge anything less than the historical norm (we all know that number). And I think many times they use the term in a deragatory way because they feel threatened. Many agents do not want the consumer to know that commissions are negotiable.
Remember, 15 years ago commissions really weren’t negotiable. They were technically, but not in practice. Borkers dictated the rate and you didn’t really stray from it. And because the agents had all the information, the consumer had no real choice. Either pay that industry norm that we can’t say we had, or go FSBO and have nobody show (see) your home.
Today things are changing. The industry is evolving and today it’s because of the consumer. The “discounters” before were really only Help-U-Sell and Assist-2-Sell, which have never had good business models so they haven’t ever been significant. The discounting before was not driven by the consumer. It was really driven by the agents who felt they needed to discount to get any business- probably because they weren’t as good of agents. Today it’s driven by the consumer… that makes it different, and honestly better because the consmer should have that choice.
Oh, and Ardell- blueroof.com should be registered with NAR now- I know we’re registered with UAR (Utah Association of Realtors)
Sorry- I meant Marlow- not Ardell…
Yes, Allen! You DO understand me! Now if you will just turn that around and say that you believe the seller pays the commission because YOU have told yourself that one too many times 🙂
Truth is Allen, there is NO answer to that question. It’s a trick question. Chicken and the egg. You are not “right” and I am not “right”…there is no right and wrong to who pays the commission. the seller pays it with the buyer’s money.
What I am saying is that here, in this State, agents represent buyers at first contact and they must offer representation as if the buyer is paying for that representation and negotiate…or not…the fee with the buyer, who is their client. The mindset is the key, Allen! The mindset must be on YOUR client.
If you only represent sellers, Allen…you can stay where you are. But when you are representing the buyer and the buyer is your client, you really must perceive that he is paying you. If you keep thinking he’s someone getting a free ride off the seller…not a good place for your head to be at when representing a buyer.
Sellers are told they CAN’T negotiate the Buyer Agent Fee or agents won’t show their house…so how can the fee become negotiable unless it is negotiated between the buyer and buyer’s agent. All fees MUST be NEGOTIABLE…not negotiated…but negotiaBLE…and don’t say BULL 🙂
Allen,
One more thing. If the company makes $30,000 a year off each agent as a desk fee and NONE are on a “split. The company then makes no more or less regardless of what the agent charges the consumer. Why then does the company have a fee policy at all, if not to invoke an industry fixed price? The company makes not a dime more if the agent charges nothing or $10,000. So why do they care what the negotiation of the fee is between the agent and the consumer?
Allen,
One more thing. If the company makes $30,000 a year off each agent as a desk fee and NONE are on a “split. The company then makes no more or less regardless of what the agent charges the consumer. Why then does the company have a fee policy at all, if not to invoke an industry fixed price? The company makes not a dime more if the agent charges nothing or $10,000. So why do they care what the negotiation of the fee is between the agent and the consumer?
Joe,
Every buyer and seller has a “job” to do. As a seller, one of the primary ways that you get top dollar is by its showing condition. Sale is about Price, Location and Showing Condition, not advertising. The MLS spiders to every agent who has a buyer and to every buyer looking at your property photos on the internet. Your house should be SOLD after 5 showings if you have done “your job”. Top dollar is more about my “positioning your home to sell” and pre-negotiating and what I do or don’t say to agents who call me BEFORE the offer is written. It’s also about helping the buyer agent get your deal closed many times.
If you are too busy in your “sweet job” to keep the place straight for the first five to ten days until I can get an offer in play, and I have to come in and make your bed, get the dirty dishes out of the sink, take Fido out for a walk during showings, eradicate your pet odors before each showing, make more flyers because you keep using them for coasters for your beer mug every night…
Now because I come in every morning and get the property tip top every day, you get a great offer, in fact you get four great offers. Now you decide you must have underpriced it and jack the price up and want me to advertise it in a double page color ad in Homes and Land to get that NEW price. No agents are showing it anymore.
Just pointing out that the seller’s job has nothing to do with real estate duties. If you have ever looked at lots of property for sale with an agent (not Open Houses…going in with the keybox) and seen what we have seen and had to deal with, you will get why I charge some people more and some people less.
Another way a client pays less is if they are simply good and reasonable people. They don’t call me every day at lunch time to toss around 18 “what if” scenarios for two weeks before the home is even listed 🙂 Usually for sellers, a lot of my hours are before the home is “positioned to sell” and put into the mls. I stage it with their stuff, move everything around, they give me the key while they go to work for up to a week until it is “just right”.
Everyone is different. Joe, it’s like women. Some are “high maintenance” 🙂 Why shoud a “high maintenance” client pay the same as one who isn’t? Price has a LOT to do with it as well. A high maintenance client buying a $950,000 house still gets a break. A high maintenance client selling a condo for $129,000 likely gets to see my back walking out the door 🙂
One % based price for all people just doesn’t make sense. And the good guys shouldn’t have to pay for the extra duties of the high maintenance client.
More specifically Joe, if I show up at your door and you are selling a condo in Downtown Kirkland for $450,000 and it’s in great showing condition and has been well maintained, no big problems in the complex that are going to pop up in the resale certificate, you price it so an offer is likely to come in within the first 30 days and you have no oddball conditions like you want to stay there for four months after it is sold.
If you are a reasonable motivated seller that doesn’t say “If I don’t get my price then I’ll just stay here.” Then I’d charge you less than you might expect. Can’t talk real numbers here, as that is against anti-trust laws. Let’s say I’d charge you about 2/3rds of what you might expect 🙂
Oh, I just remembered someone who was high maintenance who I charged the lesser fee and that was because they bought their new house with me. I have a max $ I will charge any person in a one week period. Basically, it’s just Golden Rule stuff, I charge what I, if I were you, would be comfortable with paying.
I sometimes “settle up” at the end, more often with buyers. I just figure out what my services were worth given what transpired, and I throw the rest at the sheet. But if I miscalculate in the other direction…I live with the deal I made, unless the client offers to pay the higher amount because he knows the deal we struck at the beginning didn’t work out as planned. My clients have been as good at knowing all this as I am, it ain’t rocket science.
Two good, fair and reasonable people will do business together well and usually end up friends. People who know me usually call me and no one else. I tell them what I will charge and they say thank you. Not a big deal.
Joe,
Every buyer and seller has a “job” to do. As a seller, one of the primary ways that you get top dollar is by its showing condition. Sale is about Price, Location and Showing Condition, not advertising. The MLS spiders to every agent who has a buyer and to every buyer looking at your property photos on the internet. Your house should be SOLD after 5 showings if you have done “your job”. Top dollar is more about my “positioning your home to sell” and pre-negotiating and what I do or don’t say to agents who call me BEFORE the offer is written. It’s also about helping the buyer agent get your deal closed many times.
If you are too busy in your “sweet job” to keep the place straight for the first five to ten days until I can get an offer in play, and I have to come in and make your bed, get the dirty dishes out of the sink, take Fido out for a walk during showings, eradicate your pet odors before each showing, make more flyers because you keep using them for coasters for your beer mug every night…
Now because I come in every morning and get the property tip top every day, you get a great offer, in fact you get four great offers. Now you decide you must have underpriced it and jack the price up and want me to advertise it in a double page color ad in Homes and Land to get that NEW price. No agents are showing it anymore.
Just pointing out that the seller’s job has nothing to do with real estate duties. If you have ever looked at lots of property for sale with an agent (not Open Houses…going in with the keybox) and seen what we have seen and had to deal with, you will get why I charge some people more and some people less.
Another way a client pays less is if they are simply good and reasonable people. They don’t call me every day at lunch time to toss around 18 “what if” scenarios for two weeks before the home is even listed 🙂 Usually for sellers, a lot of my hours are before the home is “positioned to sell” and put into the mls. I stage it with their stuff, move everything around, they give me the key while they go to work for up to a week until it is “just right”.
Everyone is different. Joe, it’s like women. Some are “high maintenance” 🙂 Why shoud a “high maintenance” client pay the same as one who isn’t? Price has a LOT to do with it as well. A high maintenance client buying a $950,000 house still gets a break. A high maintenance client selling a condo for $129,000 likely gets to see my back walking out the door 🙂
One % based price for all people just doesn’t make sense. And the good guys shouldn’t have to pay for the extra duties of the high maintenance client.
More specifically Joe, if I show up at your door and you are selling a condo in Downtown Kirkland for $450,000 and it’s in great showing condition and has been well maintained, no big problems in the complex that are going to pop up in the resale certificate, you price it so an offer is likely to come in within the first 30 days and you have no oddball conditions like you want to stay there for four months after it is sold.
If you are a reasonable motivated seller that doesn’t say “If I don’t get my price then I’ll just stay here.” Then I’d charge you less than you might expect. Can’t talk real numbers here, as that is against anti-trust laws. Let’s say I’d charge you about 2/3rds of what you might expect 🙂
Oh, I just remembered someone who was high maintenance who I charged the lesser fee and that was because they bought their new house with me. I have a max $ I will charge any person in a one week period. Basically, it’s just Golden Rule stuff, I charge what I, if I were you, would be comfortable with paying.
I sometimes “settle up” at the end, more often with buyers. I just figure out what my services were worth given what transpired, and I throw the rest at the sheet. But if I miscalculate in the other direction…I live with the deal I made, unless the client offers to pay the higher amount because he knows the deal we struck at the beginning didn’t work out as planned. My clients have been as good at knowing all this as I am, it ain’t rocket science.
Two good, fair and reasonable people will do business together well and usually end up friends. People who know me usually call me and no one else. I tell them what I will charge and they say thank you. Not a big deal.
Companies have fee policies to define their market niche. Articulating a fee is not price fixing.
Dell is currently getting its ass kicked because their pricing is shifty. The consumer never thinks they’re getting the best deal because the coupon codes make it seem like a lower price is ALWAYS out there. Transparency in pricing builds credibility.
Of course it’s negotiable, but sometimes it seems a little dirty to always whittle the price down. I ask my barista what coffee costs. She tells me. I pay it or I go somewhere else.
Do you sign an agreement at the beginning of the listing that articulates the contingencies? Do you define a baseline percentage and then “settle up” from there? It seems like everything you described would reveal itself AFTER some initial agreement was reached.
What is the starting point? (Before you know if you will have to make my bed or take lots of phone calls at lunch.)
In order to compare you to another agent on price, how much do you charge to list my condo?
Rarely do my clients, both buyers and sellers, bring up the issue of price before I do.
For buyers I like to “meet” them by showing them 3 properties of my choice in their price range. I can then evaluate pretty accurately what my price is going to be, if I choose to work with them at all. We interview each other during those 3 “showings” and decide if we want to work together, before we discuss price. If the purchase price is high enough, I just set my price on the spot, as what I will charge is less than what they expect, so I just offer the amount right up front. It usually surprises them, because they have worked with agents before me and never talked about the fee. So there usually isn’t a discussion. I say if the seller offers x, my charge is y, so you get the difference, if there is a difference. I usually get a thank you, not an argument. Apparently what I charge appears to be fair. Seems fair to me…seems fair to them.
With sellers, we usually meet at their house (where I get to see their bed ;-). If I need to pick up after a seller, I usually also have to help get the property ready to show. If the property is totally ready to show (rare occasion) when I arrive, and we are just listing it on the spot, it’s not likely going to be a mess during the time I need to generate an offer.
I sign an agreement with a seller at the beginning of a listing, but not necessarily at the beginning of our “relationship”. Often I am doing a little staging at that first meeting. I can generally evaluate what I need to know by their reaction to what I am doing in their house. With sellers, price has a lot to do with product. We talk about their product for quite some time, and walk through it, before we talk about my fee. Usually a seller wants to know what I think about the house, how I would stage it and what price he might be able to get for it, before we talk commission. So I have plenty of time to evaluate the seller before talking about fees.
If that last question is a real question, how could my price be fair if I never met you or saw your condo? We’re not throwing darts here. You could have an easy to sell condo or a hard to sell condo. You could have all the bells and whistles and no competition, or a condo in the one or two buildings that have “issues” and are hard to sell. I’m not “homegain”. Price has a logical rationale, not a bidding war.
I don’t charge as much as I can get away with or as little as I need to to get the business. I charge what I think is a fair price for the job at hand. I’ve never done a limited service listing, but most options are open. Not sure if I would do one that required the buyer agent to present the offer directly to the seller. I should try it once and see how it feels. Depends on my evaluation of the seller…I might do it for Cofano 🙂
I personally am turned off by the lack of transparency. I guess when I ask “what is your fee?” and you lack a solid answer I fear the worst.
Perhaps an agent with a model like yours could identify an average fee. From statistics one could determine the % of sales price for each listing, then sum those and divide by the number of listings. The median fee would also be helpful.
I’m not asking you to actually do this Ardell. I wouldn’t want you to get in anti-trust trouble be actually identifying a “fixed price.”;)
As a consumer/client, I see great value in a stated price that entitles me to lunch time phone calls, extensive staging advice and whatever else it takes to get “top dollar.” (Though, I make my own bed and pick up after myself as a way of life.)
I’m with Joe. I think increased transparency would be good, and a menu of services clients could choose from would be a great way for “traditional agencies” to innovate. If I had to make a bet, there will be more pressure on listing agents commissions first – driving the price down to a flat-fee like structure (or at least 2% or below). Buyer’s agents will come later, because there’s a lot more involved, imho, outside of just the deal negotiation.
BTW, Ardell makes an interesting point about places like Redfin, and how they’ll help you write up an offer without seeing the property. Is there any liability issue there? Does the buyer take on appreciably more risk? Ignoring any issues that would be discovered during an inspection, do buyer’s agents, in practice, actually help buyers from getting screwed (for things sellers should, but don’t, disclose)?
Cricket, I’ll think I’ll write a string of real life stories on my blog relating to your second paragraph regarding what agents do in practice. Well not all agents, just my experience. Maybe a new category titled “Decisions…decisions”.
As to your first paragraph, I guess if one believes all listing agents charge the same fee, then buyer agent negotiations would “come later. I see it as listing agents already do and have been negotiating, and the time for the buyer side is now. But not always on a % because the % offered is not known up front. No one knows what the % will be until the house is selected.
Cricket, I’ll think I’ll write a string of real life stories on my blog relating to your second paragraph regarding what agents do in practice. Well not all agents, just my experience. Maybe a new category titled “Decisions…decisions”.
As to your first paragraph, I guess if one believes all listing agents charge the same fee, then buyer agent negotiations would “come later. I see it as listing agents already do and have been negotiating, and the time for the buyer side is now. But not always on a % because the % offered is not known up front. No one knows what the % will be until the house is selected.
Sorry for not answering, Joe. I missed that comment up there. I’ll take a swing at it and hope the DOJ is too focused on NAR to come over and take a swing at little ‘ol me on price fixing charges LOL…but just this one time.
On the seller side of the commission, my fees have been between 1%and 3% with smack in the middle at 2% being the one most often used, and 1% on the list side reserved for situations where the buyer comes direct without an agent to pay and the seller buying his next home from me as well.
Most sellers are moving somewhere, and if they are buying locally, I use a multiple transaction price. I also use another price if the buyer comes direct and there is no separate buyer agent to pay, though I do not encourage buyers to be “unrepresented” in a transaction.
On a total basis, say 3% is offered in the mls to bring lots of agents with buyers. Then I sometimes do a total of 6%, 5%, 4%. Price stated is 6% with 3% to the buyer’s agent and 1% off if the seller also buys his next home from me, bringing the total to 5% and another 1% off if the buyer comes direct sans agent, bringing the total down to 4%. This would assume a price range in the $300,000 to $500,000 price range, as total dollar does come into the equation.
If the price of the purchase of the next home is high and the sale of the current home is low, I mix it up and do 1% back on the high buying side and 1% back on the low listing side, so the client isn’t getting the amount off all on the lower priced transaction. The goal is $10,000 to $15,000 per transaction, but not to exceed $20,000 for both transactions. I work with only 1,2 sometimes 3 clients at once to insure I have the right focus on each.
If I were to add some flat fee sign and lockbox only, no focus needed listings, that number would go up. Haven’t done that yet. Waiting for Russ to let me get a “hold harmless” letter 🙂 If I’m not present with the seller during the process, I don’t want to be held liable, vicariously, for the seller’s actions.
The straight 2% model assumes a price of $450,000 or higher and efforts to sell at top dollar do not involve advertising outside mls and public sites, which appears to be more than sufficient at present. Goal is to get an offer within 30 days via indirect low cost marketing vs. direct high cost marketing. This is for people who are moving out of town, so there is no purchase side, or estate sales, older person moving to nursing home, any situation where the seller is not also a buyer.
Under $300,000 is usually around $7,500 flat fee, less in the $200,000 and under price. On a buyer side it becomes a $1,500 credit toward closing costs or inspection repairs unless it is a zero down, stacked costs, low credit score scenario. Even if it is a difficult loan, the casback applies if it is an RCG reader. RCG readers get different and lower rates than “man on the street” clients because of Dustin’s structure and our original understanding.
The model assumes a contract within 30 days and a “normal” transaction. It stretches to 60 days at times without extra cost, plus the 30 day escrow work, so 60 to 90 days of work. I don’t have a past 60 days to offer backup price, as I haven’t needed one. At 60 days not in escrow, I would have to evaluate why this is so, and make the correction, but haven’t had to deal with that recently.
Correction can be changing whatever is holding everything up or shaking hands and saying goodbye if what’s holding everything up is the client being unreasonable in some way or another. Once the market “declares” what the “market will bear” and I’ve pushed everything as far as I can, if the seller won’t except the reality of “fair market value” as tried and proven, time to part as friends before it gets ugly 🙂 Sometimes a seller needs to go through two or three agents before crying Uncle on that one, but again, we’ve been in a sellers market for sometime, so those days are way behind and in the future for the most part.
Stated fees without variance are transparent, granted, but since my model is every client negotiation being reasonable for that client and that situation, I don’t want to trade in one “fixed” rate of 3% for another “fixed” rate of X. That puts us back in the situation where one client overpays because another one underpays, and I don’t like that logic. “A fair price for this client given this objective” means we have to look at the product being sold and the client who is selling it before determining the fee.
You may make your own bed every day…but you may have the unit next to the noisey elevator, or with windows facing the dumpster, or in the building where they have tried to fix water intrusion problems 6 times in ten years without success. I may charge more for that one that the scenarios above, or I may not want to touch it with a ten foot pole.
Setting a price without knowing the product is like going into Best Buy and slapping down $2,000 and saying “bring me a TV”…you have to see the product before you know the price. My price to sell that product is dependent on the price of the product and my best guesstimate of time and effort needed to sell that product at that price. Sometimes you have to sell a condo twice or three times for the same fee, because the buyer gets to cancel after in escrow ,based on the resale certificate. So building “issues” can cause a lot of re-work and that factor needs to be considered.
I know, I have no easy answers. Just who I am. But I give you no off the top of my head easy answers either. Every question and situation is given thoughtful consideration and my best answer for this situation, and that’s not just about commissions.
No “one size fits all” answers here. A specific, straight up and binding answer comes after I see the product and meet the client, because it is based on the product specifics, the sale price and my determination of whether or not the client is a good and reasonable person.
But the above should give you a rough idea of how I think and the range of options and the rationale for each option. It’s a menu of “effort required”, not a menu of “services”. Services are smoke. Selling is not about services. Selling is an artform, a dance between me and agents, me and buyers, me and fine tuning the product and the photos and the process. Most importantly, agent to agent conversations and negotiations, both before and after written offer stage.
That’s from a seller agent perspective. When acting as a buyer agent, I don’t sell, but I do dance.
Sorry for not answering, Joe. I missed that comment up there. I’ll take a swing at it and hope the DOJ is too focused on NAR to come over and take a swing at little ‘ol me on price fixing charges LOL…but just this one time.
On the seller side of the commission, my fees have been between 1%and 3% with smack in the middle at 2% being the one most often used, and 1% on the list side reserved for situations where the buyer comes direct without an agent to pay and the seller buying his next home from me as well.
Most sellers are moving somewhere, and if they are buying locally, I use a multiple transaction price. I also use another price if the buyer comes direct and there is no separate buyer agent to pay, though I do not encourage buyers to be “unrepresented” in a transaction.
On a total basis, say 3% is offered in the mls to bring lots of agents with buyers. Then I sometimes do a total of 6%, 5%, 4%. Price stated is 6% with 3% to the buyer’s agent and 1% off if the seller also buys his next home from me, bringing the total to 5% and another 1% off if the buyer comes direct sans agent, bringing the total down to 4%. This would assume a price range in the $300,000 to $500,000 price range, as total dollar does come into the equation.
If the price of the purchase of the next home is high and the sale of the current home is low, I mix it up and do 1% back on the high buying side and 1% back on the low listing side, so the client isn’t getting the amount off all on the lower priced transaction. The goal is $10,000 to $15,000 per transaction, but not to exceed $20,000 for both transactions. I work with only 1,2 sometimes 3 clients at once to insure I have the right focus on each.
If I were to add some flat fee sign and lockbox only, no focus needed listings, that number would go up. Haven’t done that yet. Waiting for Russ to let me get a “hold harmless” letter 🙂 If I’m not present with the seller during the process, I don’t want to be held liable, vicariously, for the seller’s actions.
The straight 2% model assumes a price of $450,000 or higher and efforts to sell at top dollar do not involve advertising outside mls and public sites, which appears to be more than sufficient at present. Goal is to get an offer within 30 days via indirect low cost marketing vs. direct high cost marketing. This is for people who are moving out of town, so there is no purchase side, or estate sales, older person moving to nursing home, any situation where the seller is not also a buyer.
Under $300,000 is usually around $7,500 flat fee, less in the $200,000 and under price. On a buyer side it becomes a $1,500 credit toward closing costs or inspection repairs unless it is a zero down, stacked costs, low credit score scenario. Even if it is a difficult loan, the casback applies if it is an RCG reader. RCG readers get different and lower rates than “man on the street” clients because of Dustin’s structure and our original understanding.
The model assumes a contract within 30 days and a “normal” transaction. It stretches to 60 days at times without extra cost, plus the 30 day escrow work, so 60 to 90 days of work. I don’t have a past 60 days to offer backup price, as I haven’t needed one. At 60 days not in escrow, I would have to evaluate why this is so, and make the correction, but haven’t had to deal with that recently.
Correction can be changing whatever is holding everything up or shaking hands and saying goodbye if what’s holding everything up is the client being unreasonable in some way or another. Once the market “declares” what the “market will bear” and I’ve pushed everything as far as I can, if the seller won’t except the reality of “fair market value” as tried and proven, time to part as friends before it gets ugly 🙂 Sometimes a seller needs to go through two or three agents before crying Uncle on that one, but again, we’ve been in a sellers market for sometime, so those days are way behind and in the future for the most part.
Stated fees without variance are transparent, granted, but since my model is every client negotiation being reasonable for that client and that situation, I don’t want to trade in one “fixed” rate of 3% for another “fixed” rate of X. That puts us back in the situation where one client overpays because another one underpays, and I don’t like that logic. “A fair price for this client given this objective” means we have to look at the product being sold and the client who is selling it before determining the fee.
You may make your own bed every day…but you may have the unit next to the noisey elevator, or with windows facing the dumpster, or in the building where they have tried to fix water intrusion problems 6 times in ten years without success. I may charge more for that one that the scenarios above, or I may not want to touch it with a ten foot pole.
Setting a price without knowing the product is like going into Best Buy and slapping down $2,000 and saying “bring me a TV”…you have to see the product before you know the price. My price to sell that product is dependent on the price of the product and my best guesstimate of time and effort needed to sell that product at that price. Sometimes you have to sell a condo twice or three times for the same fee, because the buyer gets to cancel after in escrow ,based on the resale certificate. So building “issues” can cause a lot of re-work and that factor needs to be considered.
I know, I have no easy answers. Just who I am. But I give you no off the top of my head easy answers either. Every question and situation is given thoughtful consideration and my best answer for this situation, and that’s not just about commissions.
No “one size fits all” answers here. A specific, straight up and binding answer comes after I see the product and meet the client, because it is based on the product specifics, the sale price and my determination of whether or not the client is a good and reasonable person.
But the above should give you a rough idea of how I think and the range of options and the rationale for each option. It’s a menu of “effort required”, not a menu of “services”. Services are smoke. Selling is not about services. Selling is an artform, a dance between me and agents, me and buyers, me and fine tuning the product and the photos and the process. Most importantly, agent to agent conversations and negotiations, both before and after written offer stage.
That’s from a seller agent perspective. When acting as a buyer agent, I don’t sell, but I do dance.
Interesting stuff Ardell… I’m fascinated to hear that you give RCG readers a little more room. Very cool.
Interestingly, I don’t think many readers know that the contributors don’t have any formal relationships at RCG. At the seminars (and elsewhere) I’ve seen complete shock on people’s faces when they find out that we do not all work for the same brokerage. I try to explain that we’ve come together out of love for blogging (and an appreciation for blogging leads), but that is rarely enough to convince people. One of my favorite responses at our Portland seminar was when someone told me (point-blank) that it was impossible and illegal to do what I was doing at Rain City Guide. It was literally “You can’t do that!” to which I responded “really?”
Of course, we continue to publish here at RCG because it is not only possible, but in my mind we’re trailblazing the future of real estate on the internet.
Maybe I should write a post on the origins of RCG and what it took (at least from my perspective) to get everyone involved… hmmm…
Interesting stuff Ardell… I’m fascinated to hear that you give RCG readers a little more room. Very cool.
Interestingly, I don’t think many readers know that the contributors don’t have any formal relationships at RCG. At the seminars (and elsewhere) I’ve seen complete shock on people’s faces when they find out that we do not all work for the same brokerage. I try to explain that we’ve come together out of love for blogging (and an appreciation for blogging leads), but that is rarely enough to convince people. One of my favorite responses at our Portland seminar was when someone told me (point-blank) that it was impossible and illegal to do what I was doing at Rain City Guide. It was literally “You can’t do that!” to which I responded “really?”
Of course, we continue to publish here at RCG because it is not only possible, but in my mind we’re trailblazing the future of real estate on the internet.
Maybe I should write a post on the origins of RCG and what it took (at least from my perspective) to get everyone involved… hmmm…
Ardell – I think it’s pretty clear that most sellers do believe that listing agents charge the same fee. This is a result of the lack of transparency. Maybe the listing agent is knocking down his/her commission in order to facilitate the sale, but this isn’t apparent to consumers.
In most businesses the commission isn’t transparent, but if in real restate it’s going to be (whether 3%, 2%, flat-fee, etc.) people are going to want to know exactly how that’s justified, and why the lesser-priced options aren’t worth pursuing.
Ardell – I think it’s pretty clear that most sellers do believe that listing agents charge the same fee. This is a result of the lack of transparency. Maybe the listing agent is knocking down his/her commission in order to facilitate the sale, but this isn’t apparent to consumers.
In most businesses the commission isn’t transparent, but if in real restate it’s going to be (whether 3%, 2%, flat-fee, etc.) people are going to want to know exactly how that’s justified, and why the lesser-priced options aren’t worth pursuing.
Cricket,
Two answers, thought of one for Joe while I was driving up to my new listing 30 minutes ago.
HomeGain sounds like what Joe is looking for. It’s a site like the lending tree commercial where agents compete by price alone and are not allowed to know who you are while doing so. They do however get more info than Joe gave, like square footage, approx price range…not sure what all.
It’s not “transparent” but honestly guys, you may like “transparent” because you are more in control, but it is clearly not your best option. Of 6 options, transparent is the worst. I don’t have time to explain now, but I’ll add it to “decisions/decisions” when I can.
Cricket, what is good for you depends on the product. $1,000 flat fee option might work if you have great curb appeal and a unique product. Won’t work if there are 5 – 10 others as good as yours within a five mile radius of your property. Everything is product specific.
Some products will sell if you hide them back in the corner because people will come and ask for them, others need to be impulse buys up front by the cashier where you just can’t help yourself. Your product, your home, is no different. As always…no simple, one size fits all answers. Some houses will likely sell from an Open House, others not. Some need full boat and costly advertising and other services, others not.
I like the transparency of say 1% IF it is in tip top shape without my help, price is $750,000 or more, it sells through “promotion” as opposed to “advertising”, you agree to add a 3% offering and put it in the mls and we re-evaluate if we don’t have an offer after the first 30 days.
Every situation comes with transparency…generalizing cannot or I allow you to shoot yourself in the foot…which is not an option.
Is the above situation transparent enough to suffice for now 🙂
Cricket,
Two answers, thought of one for Joe while I was driving up to my new listing 30 minutes ago.
HomeGain sounds like what Joe is looking for. It’s a site like the lending tree commercial where agents compete by price alone and are not allowed to know who you are while doing so. They do however get more info than Joe gave, like square footage, approx price range…not sure what all.
It’s not “transparent” but honestly guys, you may like “transparent” because you are more in control, but it is clearly not your best option. Of 6 options, transparent is the worst. I don’t have time to explain now, but I’ll add it to “decisions/decisions” when I can.
Cricket, what is good for you depends on the product. $1,000 flat fee option might work if you have great curb appeal and a unique product. Won’t work if there are 5 – 10 others as good as yours within a five mile radius of your property. Everything is product specific.
Some products will sell if you hide them back in the corner because people will come and ask for them, others need to be impulse buys up front by the cashier where you just can’t help yourself. Your product, your home, is no different. As always…no simple, one size fits all answers. Some houses will likely sell from an Open House, others not. Some need full boat and costly advertising and other services, others not.
I like the transparency of say 1% IF it is in tip top shape without my help, price is $750,000 or more, it sells through “promotion” as opposed to “advertising”, you agree to add a 3% offering and put it in the mls and we re-evaluate if we don’t have an offer after the first 30 days.
Every situation comes with transparency…generalizing cannot or I allow you to shoot yourself in the foot…which is not an option.
Is the above situation transparent enough to suffice for now 🙂
Ardell,
This comment is really my favorite piece of yours on RCG. It’s very informative and makes alot of sense…if you’re building a relationship and you know more biz is coming from them, the fee is not the same. Thorough too.
Also, I’m completely with you that industry-wide fee requirements that apply across brokerages would be a problem. Brokers (though not agents working under the brokerage sign) should have a variety of options regarding price. People should not assume that you and Century 21, Windermere, John L. Scott, Redfin, etc. have the same model. Different approaches, different fees.
It seems like most of RCG participants are either connected to the industry or pretty hard core DIYers. This response you’ve written is helpful to a different audience–people that are trying to decide between agents. This population isn’t particularly concerned with industry wide policies. They are thinking about their home. Your transparency helps alot.
I don’t think your approach necessarily is superior to the flat, 3% commish which says 3% regardless of contingencies: higher advertising costs, longer than expected time on market, unusually high neurosis by client, less DIY energy by client, etc. But the two approaches are clear alternatives. This clarity of information helps the market select winners and define niches.
I think I differ slightly from jcricket on a flattening of commisions. I think there is definitely a market for higher commissions and certain agents will claim it. Real estate investments are worth big dough. If a client feels an agent gained more than they cost, the fee is worth it. But only for agents that can demonstrate that THEIR expertise was critical to the gain. If they can’t do this…if the “house sells itself,” then why pay more? I’m with you that an agent’s expertise/skills are key. But all aren’t equal and the commish shouldn’t be either.
Great stuff. Thanks for taking the time to write.
Ardell,
This comment is really my favorite piece of yours on RCG. It’s very informative and makes alot of sense…if you’re building a relationship and you know more biz is coming from them, the fee is not the same. Thorough too.
Also, I’m completely with you that industry-wide fee requirements that apply across brokerages would be a problem. Brokers (though not agents working under the brokerage sign) should have a variety of options regarding price. People should not assume that you and Century 21, Windermere, John L. Scott, Redfin, etc. have the same model. Different approaches, different fees.
It seems like most of RCG participants are either connected to the industry or pretty hard core DIYers. This response you’ve written is helpful to a different audience–people that are trying to decide between agents. This population isn’t particularly concerned with industry wide policies. They are thinking about their home. Your transparency helps alot.
I don’t think your approach necessarily is superior to the flat, 3% commish which says 3% regardless of contingencies: higher advertising costs, longer than expected time on market, unusually high neurosis by client, less DIY energy by client, etc. But the two approaches are clear alternatives. This clarity of information helps the market select winners and define niches.
I think I differ slightly from jcricket on a flattening of commisions. I think there is definitely a market for higher commissions and certain agents will claim it. Real estate investments are worth big dough. If a client feels an agent gained more than they cost, the fee is worth it. But only for agents that can demonstrate that THEIR expertise was critical to the gain. If they can’t do this…if the “house sells itself,” then why pay more? I’m with you that an agent’s expertise/skills are key. But all aren’t equal and the commish shouldn’t be either.
Great stuff. Thanks for taking the time to write.
Dustin,
I think the origins post would be great. I think your the whole community resource versus ad for anna trajectory is very interesting. Plus, it’s pretty cool to see the audience grow. And the diverse geographies of responses. Has the direction been what you expected? What were the big surprises? Looking forward to it.
Speaking only for our escrow company…..
What many do not realize is the extent and frequency in which commissions are reduced via credits to the parties at closing. It is very common. Loan officers included. It’s a lot heavier than many would expect and I think the Realtors need to get credit for this.
The pressing question to ask is whether the owner/brokers are participating or leaving the crediting burden squarely on the shoulder of the listing agent or selling agent?
If the later is true, in my opinion that’s pretty weak/lame of the broker/owners.
Joe,
I’m glad you liked the comment. If a house “sells itself” because the agent’s expertise was in knowing NOT to put it on the market when the seller said “it’s ready” and going the extra mile to make sure it is ready before uploading it into the mls…then the “expertise” of the agent is just in a different area that what the seller originally expected they needed.
Often sellers “interview” based on the wrong criteria.
Also, please understand that I DO sometimes charge 3% and am in fact charging that on my newest listing. It’s $199,999 two bedroom condo with a Jacuzzi in Juanita. If it sells quickly, which I expect, and the buyer is golden…there could be a fine tuning downward of the fee. But not up front in the agreement. We’ll see what happens.
No price is outlawed in my “business model”. Also, other agents in the company are free to have their own business model, each is autonomous in that regard. So “Ardell’s” thinking is not Company Policy and not binding on other agents or the Broker. I’m an Associate Broker, not “the Designated Broker” who is my…hmmm can I say “boyfriend” at our age?
Joe,
I’m glad you liked the comment. If a house “sells itself” because the agent’s expertise was in knowing NOT to put it on the market when the seller said “it’s ready” and going the extra mile to make sure it is ready before uploading it into the mls…then the “expertise” of the agent is just in a different area that what the seller originally expected they needed.
Often sellers “interview” based on the wrong criteria.
Also, please understand that I DO sometimes charge 3% and am in fact charging that on my newest listing. It’s $199,999 two bedroom condo with a Jacuzzi in Juanita. If it sells quickly, which I expect, and the buyer is golden…there could be a fine tuning downward of the fee. But not up front in the agreement. We’ll see what happens.
No price is outlawed in my “business model”. Also, other agents in the company are free to have their own business model, each is autonomous in that regard. So “Ardell’s” thinking is not Company Policy and not binding on other agents or the Broker. I’m an Associate Broker, not “the Designated Broker” who is my…hmmm can I say “boyfriend” at our age?
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