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?
4 Comments
August 13th, 2008 at 10:50 am
Hey Kathleen. I loved reading this post. As I lender, I’m always looking for ways to advise my Realtor contacts as to how they might optimize revenue streams. I’ve not talked to them too much about their business model/broker model – but I do have a question. How would you feel if one of your lenders suggested a concept like the one you outline above as a way for you to improve your bottom line? Would you take it as if they were “speaking out of school,” or would you be receptive to it?
Thanks so much for any feedback you might provide. – kms
August 13th, 2008 at 1:20 pm
Kevin – Glad you enjoyed the post, and thanks for joining in the conversation.
I agree that changing something like the traditional agent compensation will be nothing less of a revolution. And, anyone who does it now is on the bleeding edge.
So, if I were a lender, I’m not sure I’d suggest changing over right away because I think there are too many questions.
But, I would feel comfortable mentioning that there is talk in the industry of the need for changing the business model.
How about you agents out there? Any thoughts?
August 13th, 2008 at 6:22 pm
Hi Kathleen,
You raise an interesting topic, which makes me think of some questions. Isn’t that model already in place with companies such as Assist 2 Sell, Help U Sell, etc.? How would liability for the REALTOR be affected? How does this affect the agent/broker relationship? I think this definitely bears further watching and further research. Maybe we have met the future and it is here.
Ellen
August 13th, 2008 at 10:40 pm
Ellen,
I think it is exciting to think of it as the future. I’ll be watching the talk on the subject and reporting back here.
I’ll have to look at the Assist 2 Sell and Help U Sell approach in more detail. Just having a flat fee doesn’t meet what I’m thinking of. But I need to give it more thought.
As far as liability, I’m not sure how it would change. Right now, there’s very little definition of what is included in an agent’s service. So, I think that writing up a list of things to be done would help, not hurt. Let me know if I’m missing something.
If an agent writes up a description of services to be performed that doesn’t include things that are required by law, then the agent really shouldn’t be in business. Otherwise, wouldn’t identifying the services help keep everyone informed?
More posts and discussion to come!
Kathleen