If fee-for-service/discount brokerage offers another avenue of choice to the consumer, it also offers a new way for Realtors to compete. That's why competition from e-discounters is healthy. Instead of increasing, the numbers of die-hard FSBOs should actually decrease as discount service affords them what they believe they want - limited service from professionals and access to the MLS.

The e-discounter is positioned to fulfill the demands of a niche, but that doesn't mean you have to forfeit a whole sector of business to them, nor do you have to compete only on the level of reduced price. There are other ways to compete, but first you have some philosophical sorting to do, because reduced fees and your responsibilities as a fiduciary are closely entertwined and will affect the fees you will ultimately be able to successfully charge in your market. By the time you evolve a competitive business model to beat the e-discounters, you may go to hell and back examining the most compelling issues of the industry - fee-for-service, fiduciary-level service, and what it means and how much it is worth to be a fiduciary or an intermediary.

Distinguish between fee-for-service and discounting

There is nothing new about discounting. Full-service agents have done it for decades on a case-by-case basis, but where the e-discounter takes discounting to a new level is announcing the business model as a matter of policy - in writing and online for the world to see. Thanks to these e-tailers, adding a listing to the MLS is a service now worth about $500, until a new support level is tested which could possibly be lower.

Discounters offer to do certain jobs on a limited basis for a set fee or commission. Discounters can be full-service agents who cut their own commissions in order to get a difficult-to-acquire listing, particularly in seller's markets where FSBOs believe that they can sell their homes as quickly as agents. Discounters gain an advantage in their ability to distance themselves from "other agents" either by price or business philosophy.

The e-discounter charges either a reduced fee for limited service up front, or if they choose to be paid by commission, they can charge a rebate to the consumer at closing. If the e-discounter charges a flat fee for service and limits the services available, that puts them in another category from other fee-for-service business models which are menu-based, up to and including full-service brokerage.

Fee-for-service, on the other hand, details the various jobs involved in the real estate transaction, and assigns them a monetary value based on time expended, difficulty, skill required, and other measures. Some jobs, such as holding an open house, are easy to quantify by a fixed hourly rate at a lower skill rate level. Other jobs, such as negotiating a contract, aren't so easy to assign a value as the time required may be open-ended or may require extraordinary skill. The skill required to be an effective negotiator is also the result of years of experience and personal ability.

Where fee-for-service can help the traditional Realtor

Where fee-for-service offers an advantage to the traditional Realtor is that it is a way of offering facilitator or fiduciary-level service for the jobs that the seller would like the Realtor to perform - no more, no less. As a full service Realtor, you don't have to choose between fee-for-service and full-service brokerage. Where the choice lays is between fee-for-service and discounting.

Full-service or fee-for-service?

Fee-for-service by definition is full service at menu rates. Think about a fine restaurant that offers its selections á la carte. Do you receive less service from the chef or the wait staff because you want a salad and appetizer with your main course, or do you receive the same service as you would for a fixed price menu? In most fine restaurants, the a la carte menu is higher in price than the comparable selections at fixed price. Why? You are getting more service - the chef's attention to your individual order.

It is up to you and your client whether or not you perform those services as a fiduciary, but you'll have more of a marketing edge if you at least make the offer.

If the level playing field is that rates are negotiable, then the e-discounter has the advantage with declared rates, and the seller expects you to match them - if you want the listing. You can match them, but you'll have to abdicate your position as a facilitator or fiduciary.

Few e-discounters are set up to advise clients except through a call center. Where you can trounce the competition handily is in your ability to serve as a fiduciary.

Want to serve both sides? You can - at a price. Where the e-discounter has the edge is that they can reduce fees by not being fiduciaries - exactly what you and your broker may be trying to do, except you both aren't down with the reduction part yet and that is where some agents are getting blind-sided. The only way to justify full service fees is with fiduciary-level service.

What does fiduciary level service mean? It means working in the best interests of the client. Some brokers don't agree with this and are supporting their states to work to change disclosures of agency-level service. At the least if you are not working as a fiduciary, any other form of representation or non-representation should require the informed and signed consent on the part of both the seller and buyer. If your buyer and/or seller want your representation after informed consent of a possible conflict of interest, then you can facilitate the transaction, but most likely it will be at a discounted fee either to yourself or your broker, or both.

Why? If you are representing both sides, you are by definition no longer working as a fiduciary for either side, but as a facilitator. As a facilitator, you have special advantages that a commissioned salesperson doesn't have - the ability to charge up-front fees and outline a fee-for-service menu in which you can offer more services than your online rivals.

As a fiduciary, you should be able to charge higher fees whether you provide full-service or not, because fiduciary-level service is by definition a higher level of service, even if it is chosen bit by bit by the consumer from a menu. However, it can be reasonably explained to a consumer that fiduciary service on a cherry-picked basis can only come at a premium.

The avoidance of fiduciary-level service is exactly where the e-discounters have the traditional practitioner on the mat. Unused to being flipped on their backs like turtles, the traditional agent is ill-prepared to fight back except to wave the flag of "but this is how we've always done it."

That was then, this is now. You not only can fight back, you can win by providing the three things that the e-discounters can't - representation, accessibility, and the power to advise. And you can do it in a way they can't - with an in-person presentation of what you can do for them.

Published: May 9, 2000

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.