Evidently not, according to a Consumer Reports survey quoted on Inman News.

If you’re a discount broker or working in that type of a brokerage, from what I’ve seen, you’ve taken a step toward a Real Estate Consulting model.  The objective is to provide a lower fee, but most of those brokerages I’ve seen have a “project description” that identifies what services will and will not be provided.

Full-Service Agents Just Seem to Provide Full-Service

I think it becomes a problem when full-service agents reduce their fee because the seller negotiated.  Full-service agents often don’t have a list of services - they just do what’s necessary.  And, according to the Consumer Reports survey, they perform the same services, regardless of the fee.

For example, the survey discovered that 46% of sellers attempted to negotiate a lower commission, and of those, about 71% were successful!

OK, so an agent decided to reduce their fee.  But, did they reduce their service level?  Evidently not.  The overall conclusion Inman News came to from reviewing the survey was that the amount of the fee didn’t affect the quality of the service.

Don’t you think that’s a bit crazy?

Real Estate Consulting Rocks!

The typical arguments I’ve seen about not reducing fees use examples like lawyers.  If a lawyer makes $350 an hour, do you think they’re going to lower that fee because you ask?  I can understand that it might be a bad example to use.  REALTORS® might not really identify with being on a par with lawyers.  But, what about consultants?

The consulting industry has been writing project descriptions forever.  A consultant’s knee-jerk reaction to a discussion of reducing fees is to find a way to meet the client’s objective while eliminating some of the steps in the process.  It would never enter a consultant’s head to reduce the fee and provide the same level of service.

I think the issue gets back to how you value your skills.  I know there are a lot of ditzy real estate agents in the world; I know that there are a lot of agents who just work part-time; there are agents who got their license because they were bored and wanted to get the commission when they sold their house.

But, there are also very talented, personable, knowledgeable, seasoned professional REALTORS® who really care about their clients, who work very hard, and who have saved more than one client’s behind on a deal.  Why would that person want to lower their fees?

Start by Documenting The Effort Expended

Maybe a place to start is by figuring out how many hours you spend on various transactions.  Do you have that information?  Not just a guess, but an actual accumulation of hours spent?  If so, bravo! 

If not, start jotting down the hours you spend in all the various aspects of helping a client buy or sell a home.  Once you start getting a feel for the effort involved, you’ll be able to appreciate the effort and expertise you bring to the table.

That might just start you on your way to moving toward a real estate consulting business model…

The Answer Is: No.

Just because you are establishing a consulting business model, you’re not necessarily reducing your fees.  You are letting your clients have choices about the level of support you provide.  And, I think it would be important to make that distinction clear to your clients.

As Jack Harper said in the Real Town Real Estate Consulting Group, “we have a pricing schedule that sets hourly and bundled prices such that when the client decides to add a majority of them all up it would total just below full-rate traditional commissions. The reason is that they are paying up front. Since the risk to our income is reduced, we can afford to lower the fees.”

Have you ever thought about all the things that have to be done when you’re acting as a listing agent?  If not, take a look at this list compiled by the Orlando Regional REALTOR® Association.  There are 180 tasks.  Not all of them need to be done for every transaction, and depending on the situation, some of the tasks may take a few minutes or a few days.

Now, as you look over that list, think about the potential for breaking the tasks up into “bundles”.  Can you see the possibilities?

I’ve talked before about the fact that I think agents and brokers are running real estate consulting service firms.  Today, I saw a couple interesting posts on RealTalk about changing how real estate professionals charge for their services.

Have you thought about it?  Do you think it’s possible?  Do you think it’s necessary?

The posts were made in a RealTalk Group called “Real Estate Consulting” by Jack Harper.  Jack has been a licensed REALTOR® since 1983, and is a broker in California.  Jack says that he is an

• avid proponent of radical change in how we in the real estate industry need to restructure our business models - away from transaction-dependent contingent commissions and toward service models that are more client-centric and allow the consumer full choice when it comes to selecting the services they want us to perform on their behalf.

I think it’s a fascinating concept for real estate professionals to actually get paid for the time they spend on a client’s behalf.  Here’s how Jack explains his approach.

Having been in the consulting business for quite a few years, I understand how the consulting fee model could be applied to real estate.  I think the question is, will the industry be able to pull it off?

Jack talks about three different types of pricing models:

• Hourly Services
• Consulting Packages
• Full Service Plans that could either be traditional commission or a capped fee

Can you think of services you perform that could fit into an hourly fee structure, or ways to bundle certain services in to a package?

The first thing any consultant learns is how critical it is to manage the “scope” of the project.  That’s why it’s important to write a project description that defines exactly what tasks will be performed.  Any consultant who doesn’t learn how to manage their projects’ scope doesn’t stay in business very long!

If a proposal states that two revisions of a design are included, that gets written down and accepted by the client.  If the client wants 15 revisions, they know that some of those revisions will be outside the scope of the project.  Well, they don’t always know it — but when the fact is pointed out, they can see it’s right there in black and white.

Why should real estate consultants charge any differently?