This fictional post was inspired by Mark S. Nadel’s A Critical Assessment of the Standard, Traditional Residential Real Estate Broker Rate Commission Structure, published by AEI-Brooking Joint Center (October 2006). We support freedom of choice for both brokers and consumers.
The Year: 2010. A Real Estate Fee Model has been approved by the National Association of Innovative Realtors (NAIR), a new organization formed after the DOJ/NAR “Debacle of 09″.
After trying every business model to attract both sellers and buyers, NAIR consulted ZAL, a sophisticated computer created by genius Dylan Burton, former ticket agent and train conductor. He hired statisticians to feed it algorithms and economists to stuff in theories. Pundits added rhetoric while lawyers added disclaimers. Even a master chef was hired to create a “secret sauce” (not for the computer but for Dylan who liked to grill). The real estate industry waited with bated breath. Polls were taken on which business model would win—the traditional percentage model, the discount/rebate or the fee-for-service model. Vegas even had a betting line.
Finally, ZAL gave its answer: A Real Estate Menu with every business model included. A buyer or seller could choose whatever menu items they wanted. It was so simple; there was no perfect business model to please everyone. Now there was something for every client under one roof. NAIR immediately adopted a Model Real Estate Menu of Services (REM). The DOJ passed a law requiring all licensed brokers to prominently display their REM and provide a copy to consumers. And so it came to be. Every broker advertised its REM as more satisfying. Some clients preferred the All You Can Eat Traditional fare while others went a la carte or ordered from the McBroker side of the REM. Traditional brokers merely reassigned personnel according to their experience or expertise and created new departments to meet the needs of the varied clients. New agents usually had to cut their teeth on the mundane tasks while the Top Guns had their choice of serving the gourmet menu items. Clerks were hired to do internet listings & searches. Brokers discovered many clients still preferred the traditional model but they did not lose other clients to the discounters. They could now service everyone. There was a consultant for every need. The long tail of real estate brokering was born.
Here is a glimpse of the Model REM (brokers need only insert the numbers):
BUYERS MENU (please order by number)
Appetizers
1. House tours: $ per house; $ /half dozen; Full day (unlimited) $. Hourly fee available: $/hr. (min. 2hrs)
2. Negotiation Service: $ per house or % of the amount we save you off the listing price
3. Internet house search: Give us the parameters and we’ll hunt houses down for you: $/hour or $ per house found. Flat fee: $ till you tell us to stop looking
4. Appraisal: Starting at $. A written report prepared by a licensed appraiser.
5. Comparative Market Analysis: Always Free
Entrees:
6. Full Service Exclusive All-inclusive Representation (All You Can Eat): % of the sales price. If a listing broker agrees to pay us this fee from their commission, you pay nothing– we’ll collect our fee from the listing broker. We visit the home, negotiate and more. This is a total package deal. Our negotiation skills are unmatched. Our stats show we save clients % off the list price, on average.
7. Dieter’s Special: % rebate of the fee paid to us by the seller or listing broker. (A minimum fee applies). We do not visit the home but we’ll negotiate on your behalf. Perfect for the do-it-yourselfer or combined with 3. (not available in all states. Some services may not be included)
Sides:
8. Moving & Storage services: flat fee or hourly depending on distance. We have the best movers.
9. Utility Account set-ups: Phone, electric, cable, hi-speed internet: $ per account
10. Landscaping and other contractors: Discounted with Full Service representation (contractors pay us a referral fee). See our list of experienced bonded & insured professionals.
SELLERS MENU
Appetizers
1. Staging: Depending on condition of premises. Sell faster and for more money.
2. Organize & conduct Open House tours: $ set-up fee plus $ per hr. of showing
3. Negotiation Service: $ per hour. No personal inspection or visit to any property.
4. Appraisal: starting at $. A written report is prepared for you by a licensed appraiser.
5. Comparative Market Analysis: Free
6. FSBO Consultation: Free. For those who want to sell on their own, we explain the process.
Entrees
7. Traditional Full Service All-inclusive (All You Can Eat): This % of the sales price is negotiable. This is an all-inclusive full service luxury package. If accepted buyer is unrepresented our fee is reduced by %. See agents for latest promotions and extras.
8. Dieter’s special: % of the sales price or flat fee (negotiable). Some services may not be included.
Sides
9. Moving & Storage services: flat fee or hourly depending on distance. We have the best movers.
Incentives and Bonuses:
Quick sale (accepted offer within 30 days): a % or $ bonus
Sale over list price: % of the amount above the list price we get you
Sale below list price: We’ll eat % of your reduction or charge you % less, whatever is to your advantage (only available with Traditional plan)
Discounts, Promotions & Specials:
Repeat Client: Our Traditional Fee is reduced by % as a reward for your loyalty
Sell/buy package: See your consultant for current discount
Referrals: Send us a referral and earn cash. The more referrals you send, the more you earn. See agent for details.
Financing Special: APR no points, no closing fees. Other products available from our lending partners
Moving special: Our moving vans are now free to our full service clients.
Current Promotion: Free 7 day Hawaiian vacation for your listing. Awarded at closing. (see agent for details)
OUR FEE GUARANTEE: We will match any competitor’s fee for comparable service.
THE HOUSE OF REAL ESTATE: More services, more results. Over 2,000,000 served.
Gift Certificates Available. Sign up for our day & evening classes on buying, selling, and financing.
Visit our bookstore for great selection of real estate bestsellers. Tell a friend.
Select our Company and get savings on professional services, products and other services from our referral partners & affiliates.
Interesting ideas. Some of my clients would not take the time to research the various options and tell me that they hired me to figure it all out. If I were selling my own home today I would have trouble choosing. Apple computers had a similar problem where they rolled out so many models that consumers were confused over what to buy and did not understand the offerings. The agent in my however would actually like to work in a similar situation as long as I remainded self employed and did not “work for” a real estate company.
This is true. The challenge will be to encourage one model (the model you currently use or favor) but inform consumers that they have other options, so you dont lose these consumers to the newcomers. The risk to the industry right now is that the DOJ will open the foodgates to aid the new models which do not have the overhead as the traditional brokerages & traditional brokers will have to play catch-up. The ultimate way to compete with a new business model is to offer similar options so that you can compete with anyone. It’s long tail brokering or using MSP (instead of USP)
http://tinyurl.com/wuvel
Very creative presentation and an interesting topic … the only issue I have is with this line … “DOJ passed a law requiring all licensed brokers to prominently display their REM and provide a copy to consumers.”
Why as an independent contractor am I required to have an REM? One may argue it’s for competitive survival; I would argue that only applies if you believe you have to have such a service model to survive. I’ve not seen anything conclusive to show a la carte service is the way to go, not without EXTREMELY tight legal language to limit my possible liability solely to those areas for which I was hired.
We seem to be looking over our shoulder at the DOJ, yet the only case I see is DOJ vs. NAR which is relatively narrow in scope. Please, if there’s more to it than a misguided attempt (since rescinded) by NAR to prevent some Internet-minded real-estate folks (aren’t many of us?) from having access to listing information or if there’s a second (or third or fourth) complaint I’m not seeing, by all means take a moment and edumacate me.
Jonathan,
Re: DOJ passed a law…
It was a dig at government (DOJ)(over)regulation.
Re: I’ve not seen anything conclusive to show a la carte service is the way to go
We agree. The model in this little tale did not sacrifice the traditional full service, all you can eat, fare, it merely added an a la carte option. The point we were trying to make is that you dont have to give up the traditional model but if you want to get those consumers looking for options, just offer that too. After comparing the various menu items they may find the traditional model more satisfying. If they go a la carte, you still have a client (& referrals?). With incentives & bonuses tied in, you may still come out ahead, especially during slow markets. Also, adding the ancillary services is another way to market a truly full service brokerage house.
Re: Looking over our shoulder at DOJ
The point of the story was not to create a model in answer to a DOJ ruling but as a response to new business models which seek to take clients away from traditional brokers. The Nadel paper was the inspiration. It’s an interesting 77 page read.
We couldn’t begin to educate anyone about what the DOJ has up its sleeve. But any decision which renders access to listings easier would allow anyone to set up shop w/little or no overhead beyond a computer and website.
Jf, many of us on the same wavelength. Very creative way to present this. Thanks for pointing out the study.
I love this! Coming to a reality soon (2007)!