Feedback Regarding Real Estate Fees

Yes, I was one of many real estate professionals who responded to "Last Stand of the Six-Percenters", a posting (based upon a New York Times article with the same title) that appeared on brokeragentnews.com a few weeks ago.

A follow-up article appeared today, containing responses from many other real estate professionals who feel as strongly as I do about the value of my professional services, compared to a typical discount real estate agent or firm. (My response is not in the follow-up article, but I couldn't resist adding a few words to one agent's comments and additional comments are added after this article.)

Please note that this is NOT to say that I, my company, or anyone quoted in this article charges 6% or any specific fixed fee, because fees charged by real estate agents and companies are negotiable; real estate fees are not fixed by law, custom, or the policies of any organization. Reference to the 6% figure is ONLY to the article's title.

The principal under discussion is this: Quality real estate service at a higher price or minimal real estate service at a lower price. I think you would agree that you can buy a better quality shirt at Nordstroms for a higher price than you can for a lower price at Kmart or Target. Replies in the following article are a defense of high quality real estate services to the public in the face of competition from discounters that provide little service, if any.

Here's the article (and please feel free to provide your feedback regarding this topic):

Online Marketing: Agents Sound off About How to Combat Discounters
by Michael E. Parker
BrokerAgentNews.com

A recent article we wrote attracted more customer feedback than any other we have ever written. That article, "Last Stand of the Six Per-centers" - taken from an article of the same title in the New York Times - seemed to strike a chord with so many professionals that it seemed some of their excellent ideas for how to combat the tactics of discounters should be shared with everyone reading this column.

Before doing so, however, first, let me thank you all for taking the time to respond and for agreeing to share your good ideas with others. Comments received were overwhelmingly favorable (you can read that article by clicking here.

Although I'd like to publish everyone's comments, there isn't enough space available to do so. We received only two negative comments: one started out, "you are a fool" We won't be quoting that one! Another accused us of offering opinion without factual back up; it's like the writer did not believe in the practices of the discounters we cited. We sent that writer a reference to validate that we did not make it up. Here, then, (with some editing and rephrasing done by us) are points to ponder when resisting discounters:

The liability issue.
"I believe agents are also not emphasizing the value of their liability reduction strongly enough. These "fly-by-night" discounters are here today and gone tomorrow. It might not be a matter of "If you get sued" it's more like "When you get sued." If a seller happens to be hit with a lawsuit over the sale, that seller had better hope that the broker is still in business so that someone else is helping defend them. How can any discounter be on top of local disclosures, local codes, cc& r's, and how could any generic discounter who is not involved in the community protect the seller?" - Loren Prentice, a RE/MAX agent from Southern California.

Making the distinction between yourself and ordinary agents.
"Most agents are not working full time, nor are they good at what they do. The barriers to entry are minimal and there is no regulation of the industry: anyone can print up a card that says "real estate agent" and demand to be treated equivalently to a real professional. Your prospect needs to know that you are NOT barely hanging on by your fingernails, but that you are prospering, even in the hard times, as all true professionals manage to do. True professionals seem to have no problem generating enough business to make a healthy income. For those who cannot, that's the nature of competition." - Brian Short, a C21 Agent from Idaho.

Letting the prospect know the damage done to them by discounters.
"Heavy discounters often cut the co-broker commission. How many agents are going to emphasize a home with a __% commission when the market is flooded with homes at a higher commission rate? When this happens, often the home - unbeknownst to the seller - is doomed to have the listing expire unsold, or take forever to sell because other agents won't emphasize that property to their clients. It's one thing to negotiate a lower fee for yourself and agree to do the full job, but to think that the other side of the transaction will accept that is unrealistic." - An Independent realtor in Jacksonville, Florida

Create value in everything you do for the consumer.
"I manage a Coldwell Banker office in Ventura, CA and it's a constant struggle to maintain our fees in the marketplace. Commissions of __%, __% and even a flat fee are always available. I constantly remind my agents that they must create value in everything you do for the consumer. The consumer doesn't understand what we do and they cannot relate to the hard work encompassed in selling property, especially in a hard market. All they see is the large commission on the listing agreement. While it is true that some agents do not deserve a full fee for what they do, my agents know that if they are going to expect to earn a full fee that they must now their market better than competition, offewr outstanding service and creative marketing techniques and be skilled and savvy about the entire process, from marketing, to negotiating to closing escrow. That's what the consumer deserves, and if they got it more often, there would be no discounters." - Jeff Haring, a Coldwell Banker Branch Manager in Ventura, California

Remind the consumer that fees have not increased in 50 years! "Real estate commissions have always been __% in my area, whether the home sold for $15,000, $150,000 or $1.5 million. Sellers have traditionally seen the value in that because they know that a Professional real estate agent is ethically and morally giving them services that they can trust. Houses were not meant to be piggy banks; rather, they are your place to call home. As home prices have increased, so has the cost of living and the amount of commission that represents. Nonetheless, it's the same percentage as back when homes cost $15,000 and a good job was one that paid $10,000 a year. Virtually every professional service has increased proportionately to the rate of inflation and the decline in purchasing power of the dollar. What sellers need to consider is that it has become more difficult and expensive to market homes properly and to call attention to them just for viewing, because inventories have doubled - or even tripled - in some areas. Buyers need to be reminded that they get what they pay for, and that a __% commission is a good value when negotiating all that comes with buying or selling a home these days. Besides, how many sales generate the full commission to one party? The buyer should know that the commission is usually split FOUR ways, and that while the commissions can appear handsome, the work necessary to earn them requires professionalism (plus a hefty financial investment, extensive training, a strong support team and very long hours)." - Chris Weingert of Hanson Realty (additional comments added by me)

Point out that you are the consumer's partner in the transaction. "Our management services include much more than shuffling paper! Try managing a divorcing couple in a transaction without being there in front of them. It's almost impossible to do on line. Who is going to answer the phone at 10 p.m. to answer questions that keep the buyers awake at night? Who will save the deal when buyer's remorse sets in?

It's true that our services come at a cost, but experience and knowledge become invaluable whenever the doo doo hits the fan, and it hits the fan a lot more often than people may think. We put out fires before they become emotional, psychological and financial conflagrations. Paper factories can't and won't do that. Just wait until the banks are wining and dining us again because their REO's are again forcing them to open a special department just to deal with them. So, today, it seems to be discount services in exchange for a fast buck and volume.

Those of us who have been through the 80's and 90's have learned some valuable lessons, and among those lessons, none stands out more than this one: It takes a lot more than a paper shuffle to hold a transaction together when interest rates climb, when the market is flooded with properties that aren't selling: it takes a real professional realtor. It is only then that consumers seem to recognize that the value of our services is true and justified." - Clay Madisen, Leadingham realty

Take advantage of this tremendous opportunity for skill to work. "I remember talking with our of our office's veteran producers when she said "I just can't justify charging my customer six percent. Prices have gone up so much it just isn't fair!" 'Fact is, she was depressed. We talked and I reviewed the marketing plan for the property. I suggested a professional photographer, a virtual tour with music. I pulled comps, found that: 1) Nothing was moving in this area; 2) Everything else was __% to the selling office; 3) Most of the listings seemed to be overpriced, perhaps to make up for the slashed commissions. We applied the marketing, we lowered the price a little bit, and we raised the commission to __%. Two weeks later, the property was in escrow.

The moral to the story is that you are not only charging __ percent because you are worth it, you are doing so in order to get the listing to stand out to the buyer's agents! CAR says that a majority of the time, an agent brings the buyer. We have over 2800 listings, yet only 400 sold last month. It stands to reason that if you do not discount, and make the listing stand out to the buyer's agent, it will be looked at more and have a better chance to sell. It's money that motivates people to work, not discounts!" - Keith Sorem, KellerWilliams in Glendale, California

Use technology to make yourself stand out from the crowd. "Despite a dramatic fall-away in the market this past year (sales in the area down 1/3, and prices down about 15%), I have gone from $10m of sales in 2005 to $12m closed and $2.6m still scheduled to close in 2006. Median sale price of homes in my area is about $275k (though I achieve above that). I work on my own, no assistant or "team". I rely heavily on technology (I am also a member of the Allen Hainge Cyberstars), but keep the personal touch, and nearly all my business comes from referrals, repeat business, and my website.

I had one of those "weak" agents ask me a few weeks ago "how have you managed to do so much business with this market" and I simply replied "service and reputation". He said "nah, it's just because of your website". Well yes, that's all part of it. My website is part of the service (great marketing, virtual tours, Client Service Center [Settlement Room] ) and helps attract the new business, but it's the personal touch, experience and expertise that they all appreciate and retains them, brings them back, or encourages them to refer others." - Chris Laurence, RE/MAX Choice, Front Royal, Va.

Remember that for all the high tech, a big part of it still is about prospects finding you on the Internet and your having a presence there. "I listed and sold 32 listings in my area's most exclusive area last year. My buyer's agent had 90% of his buyers come off the Internet last year. One client from San Francisco found me through the Internet and drove up here and bought a home on the golf course and five acres of salt waterfront.

I am convinced that being able to show prospects my Internet presence and relate to them the tie-in to how many transactions start on the Internet is a big factor in closing listing transactions at full commission. Once people see that you spend the money to succeed, they want to have you working for them and they understand that the money paid in commission is spent, in part, on finding them a buyer." - An independent realtor in Seattle, WA.

So, there you have a small portion of the ideas that were floated by readers last week. I can't tell you how many people took the time to write and say something like this:

"The bottom line is that you get what you pay for. I am proud to be a Realtor and take my job very seriously. I am a professional who expects to work hard for my client and do a good job to take care of his/her needs in real estate. I earn my commission. It's too bad the public is constantly being fed a line that we are expendable and that what we do could be done by a clerk." - Diane Gomez Re/Max Austin Associates, Austin, Texas

I think there are probably a lot more ideas out there, but they all seem to be a variation on one thing: It's up to us to let our prospects and customers know how valuable what we do is to them when buying or selling a home. It's a little like the self esteem issue that so many face in adolescence: If we don't value ourselves highly, how can we expect anyone else to do so? It's my personal opinion that if discounting were the answer, no fortunes would have been made in real estate. As we've said before, oats have two prices: one before the horse eats them, and one after the horse eats them. Commissions are a quality issue. Prove yourself worthy, and they will come.
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Now I'm going to add my comments, and I hope you will feel free to add your own feedback.

I'm in the business of creating success stories for home buyers and sellers - not churning out computer data to them so they can approach one of the most important business transactions of their lives from a position of inexperience and ignorance.

Did you ever hear the expression "You have a champagne taste on a beer budget"? It refers to people who want the best but can't or won't pay for it. Yet, even among champagnes and beers, you will find variance in quality with accompanying variances in pricing. The bottom line, of course, is that you get what you pay for!

Real estate agents who invest in advanced training, state of the art technology services, strong support teams, attractive office environments in convenient locations, helpful brochures and up-to-date real estate forms, and personal service are worth more than licensees who operate out of their garage with little more than a web presence to offer consumers. Consumers usually pay more in the long run to use a discounter because they go into negotiations without the advantage of an experienced real estate professional to advise and advocate for them.
If in doubt, just read some of the client success stories on my website.

Okay, now you're read what real estate agents say about their value; would you like to comment?

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Additional articles on the topic:

Last Stand of the Six-Percenters. NY Times
Seller Unhappy with Discount Broker. Realty Times
What do Agents Really Bring to the Table? Realty Times
Study: 83% of Sellers Use a Full-Service Broker. REMAX.net
Are Full-Service Real Estate Agents Worth the Extra Money? Elizabeth Weintraub

For feedback or more information:

• mwoda@remax.net
• www.MargaretWoda.com

Feedback Regarding Real Estate Fees

Source: Broker-Agent News