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Named by the National Association of Realtors® as one of "The Twenty-five Most Influential People in Real Estate" Julie speaks internationally on real estate trends, consumer centricity and real estate agent profitability.
Unbundling the Real Estate Transaction: Part II
"Unbundling the Real Estate Transaction
Providing Fee-based Services as a Real Estate Consultant"

---The Rest of the Story

Julie Garton-Good, DREI


In previous articles on unbundling the real estate transaction, I've addressed my findings from more than three decades as a real estate professional coupled with fifteen years worth of debriefing real estate consumers as a syndicated newspaper columnist. And frankly, the results aren't what I expected.

WHAT CONSUMERS' WANT AND DON'T WANT FROM US
Consumer Reality #1: Sellers don't care about service. If working with an agent didn't result in a successful sale (i.e. generate results) service was valueless.
Consumer Reality #2: Our skill model is upside down. When asked what segments of the agent's skills/services were deemed most valuable to the consumer, 85% rated the CMA as the most vital tool---far overshadowing the obvious people-related, strengths of negotiating and counseling. The industry lesson is that we have not properly showcased the value of one-on-one skills to the consumer; in other words, that which is not differentiated or constantly visible is discounted (like late-night negotiating with a buyer.)
Consumer Reality #3: Consumers want what they want, when they want it and will gravitate to the most cost-effective source to obtain it. Why? Because our "one-size-fits-all" approach to working with sellers and buyers is archaic and won't allow consumers to access various segments of help they need in a timely fashion. That's why .com web start-ups are finding a receptive audience in real estate consumers and why for-sale-by-owners are burgeoning.

HOW DO WE START TO UNBUNDLE SERVICES?
The easiest target, fastest-growing target for unbundling services is also the most overlooked and under-serviced---FSBOs. The turbulent market of the past two years has stripped equity out of consumers’ homes, leaving them with little ability to find dollars to pay hefty double-sided commissions. In fact, in some parts of the country, for-sale-by-owners exceed fifty percent of all properties available in the marketplace and is likely to keep growing. That's a statistic to pay attention to. And even if online services help FSBOs lease signage, write ads, etc. there's still money to be made offering those personalized services of negotiating, advocating, and troubleshooting the transaction.

DO THE MATH AS A REAL ESTATE CONSULTANT
Crank out your calculator. How many hours would it take to negotiate between the FSBO and a qualified buyer and monitor the sale to a successful closing? My research shows a median timeframe of ten hours for these tasks. What if the parties to the transaction were willing to pay you, say (for the purpose of example only) $150 per hour, capped at a maximum fee of $1,500? And what if they'd give you a $500 retainer against that fee? (passed through your broker's escrow account, of course.) So on a 50/50 split with your broker, you'd gross $750 per FSBO transaction as a consultant. And if you closed just two of these assignments per month, that would be an extra $18,000 a year! Certainly nothing to sneeze at and a professional activity that mixes well with commissioned-sales business. (And don't forget that satisfied FSBOs are an especially good source of recommending you to others. After all, they've won, so they're willing to help you win.)

EASE IN WITH CONSULTANCY AS AN ALTERNATIVE CHOICE
Yes, it's true, most of us would rather have a root canal than spend time hammering a FSBO to list. But what if in lieu of listing, a consumer would choose to actually pay us for services rendered? Would that be worth the effort?

Give it a try the next time you have the opportunity. Offer it to a FSBO as an option to a formal exclusive listing (after receiving the blessing of your broker, of course.) In my experience, you'll receive one of two responses from the consumer: 1. "Read my lips, I want to sell my house myself." Or, 2. "That's interesting. It could be exactly what I need. How much will it cost?"

WHAT TO CHARGE & HOW TO DECIDE
Now for the question every one wants a panacea to---how much to charge. The answer? Ya gotta figure it out for yourself. (Not what you want to hear; but truly what you NEED to hear.) Why? Because one of the beautiful things about being a real estate consultant is determining the TRUE value of your expertise. We've long been slotted as "just another real estate agent, charging the same X percent." Now (using much more than fee differentiation) we can niche our market by being the best at a certain task while being rewarded in proportion to our ability---much like the CPAs and attorneys you refer business to.

When deciding what to charge, you first must determine the:
  1. skill level required to perform the service (broker, agent, licensed/unlicensed assistant?)
  2. cost of any new training required to satisfactorily do the job;
  3. per hour dollar-value of the person performing the task (allowing for a factor of "lost opportunity" time that could better be spent doing or developing other higher-paid opportunities); and
  4. block of time it would customarily take to perform the unbundled activity (including a factor for additional administrative or clerical assistance, cost of supplies, technology required, and more.)
ANALYZE RESULTS
After performing this cost-analysis gyration, a broker/agent might find that it:
  1. is unrealistic that a consumer would pay enough for the unbundled service to be profitable to the brokerage;
  2. could work financially, but not with top producers; or
  3. could make financial sense to begin the unbundling process with "troubleshooting-the-sale-services" for FSBOs, using existing administration personnel.
The alpha and omega is the principal broker. He/she not only makes decisions for the brokerage about whether unbundled services is a logical fit for the brokerage, but typically dictates the services offered and a range of fees for those services.

BOTTOM LINE: CONSUMERS WILL GET WHAT THEY WANT
The good news is that consumers want what they want and will compensate experts who provide it to them.

The bad news is that real estate consumers want what they want and will gravitate to professionals who provide it. And since the real estate industry is the last of the financial industries to unbundle services, it's merely a matter of time before empowered consumers vote with their feet, and their wallets, in the move to unbundled, results-oriented, cost-effective real estate answers.

Julie Garton-Good has designed the "CCREC" (Consumer-Certified Real Estate Consultant™) designation and training course. She is the sole three-time recipient of the Real Estate Educator Association's "International Real Estate Educator of the Year" award. An award-winning real estate educatior and author of seven books, Julie's 4th Edition of "All About Mortgages: Insider Tips of Finanace and Refinance Your Home in Today's Economy" was releaed in 2008 by Kaplan Publishing, New York. You can reach her at 1-800-Hi-Julie or on the Web at www.juliegarton-good.com