According to the NAR's latest homebuying/selling survey 2000, sixteen percent of sellers sell their own homes. Sellers who sell their homes themselves tend to be younger and earn less money than agent-assisted sellers and they use the Internet more. Slightly less than half of FSBOs sold the home themselves to avoid paying commissions to Realtors.

That's the FSBO market from which the e-discounters pull, the seller who is pre-disposed to cutting commissions. But as thousands of e-competitors are finding out, driving visitors to Web sites is easier said than done.

Where the mobile independent agent has the advantage is the ability to do in-person presentations, and that makes competing against the e-discounters virtually no different from competing against a competitive agent who discounts fees. The difference is you have to know what the e-discounters programs are and where they cut fees and limit service, so that you can overcome objections based on their published business models.

Working with Sellers

Currently, e-discounters are operating on the listing side of the transaction. Some day, when buyer's agency and single agency are more standard, there will be e-discounters working as buyer's agents. But for now, let's concentrate on the competitive model at hand.

With reduced fees on the minds of many sellers, price is an issue that is bound to come up in your listing presentations sooner or later, so you might as well be prepared. Whether or not you intend to offer a fee-for-service schedule, you need to prepare one for your own aggrandizement. How can you possibly explain what you are worth to a seller without a list of services and estimates especially when competing against published fees? This is especially true when you approach FSBOs who would like to take advantage of some aspects of agency without full-service fees. The second thing to do is to understand your marketing limitations under your broker. The broker will most likely not allow you to cut fees, but you can possibly come to a case-by-case agreement with the broker. What you can not do is go behind your broker's back and start a fee-for-service "consulting" business in his/her name and cut the broker out of all your earnings.

To start a fee-for-service business model or to fight back against one if you have no intention of reducing fees, you must do the following:

1. Find out your seller's motivation for wanting lower fees

According to the latest NAR home buyer/seller survey, 50 percent of sellers go FSBO to avoid paying commissions. Does that mean your seller is similarly motivated? Find out if your seller wants to save money for its own sake, or if there is an objection you can overcome associated with money. Is the seller distrustful of Realtors? Doesn't understand what they do to earn all that money? Does the seller have little equity in the home and fears that the Realtor will take it all? Has the seller been harmed by a Realtor in the past?

2. Know what you are worth.

Create a fee-for-service pricing schedule even if you have no intention of acting upon it. You may be surprised to learn that the sum total of tasks and fees can add up to more than the full-service commission price would have. The fee-for-service schedule can also open your eyes to which activities are income-producing and which ones require the most experience - information you can use when you get in front of a seller.

North Virginia REALTOR® Lee Bowman, offers a menu of services to sellers, some of which are marked up at higher values than other services. This is a means of compensating him for his expertise based on the importance of the job at hand.

For listings, he offers a generous co-pay to the buyer's agent (3 percent) while he takes one percent plus the total fees for the menu choices made by the seller. "When sellers choose this option, they pay the total cost of all the various services they have chosen at the list signing, and the fees are non-refundable," explains Bowman.

2. Create a pre-listing package.

Outline the services and fees you offer in a pre-listing package. That way you can cover questions such as whether or not the CMA is free of charge by the package that the seller chooses. Bowman says, "I have noticed that serious sellers react much differently when presented with a well thought-out pre-listing package and are more receptive to what I have to say because of it."

It also helps explain why services such as CMA's aren't free. "Let's say they choose my "Menu of Services," explains Bowman, "They would choose the CMA option (with corresponding fee) or they would choose the Rebate option (in which case, the CMA is part of the full service). Is there the possibility that I will make presentations (including the CMA) and not get the listing?

3. Post your fees on the Internet.

The advantage of posting your fees is to be able to show your other marketing tools, which can reinforce the cost of your fees helping you to convince your seller that your full-service fees are worth the money.

One of the most effective demonstrations of this technique is provided by Dave Davidson, principal of U-List Advantage. Davidson says, "Give the consumers a choice - a break away from the "one shoe fits all" concept (6% commission). That is what will keep Realtors in control of their business.

Explains Davidson, "Our studies indicate that consumers want to save money but also want professional service. I believe you need the fee for service concept and also a program for full-service with value-added features."

"When this happens the Internet FSBO companies will not be able to compete with the local real estate firms," asserts Davidson. "Consumers want to deal with professional Realtors, they just don't like paying $20,000 to have their property sell in 48 hours."

4. Explain the difference between commission and fees.

Commissions can not be paid in advance according to state regulations, but marketing fees can, and that is the edge the e-discounters have. Many sellers are surprised to learn that in order to save money, they must pay in advance of getting their home sold and that MLS listings are no guarantee of a quick sale.

"Get the marketing fee paid up-front, non-refundable, and give them (the seller) a break on the amount they are paying. If you're in a hot seller market, then they will love you," says Chris Newell .

Massachusetts-based MBA and Realtor Mollie Wasserman is a fee-for-service activist, and believes that commissions are incompatible with fiduciary-level service. She explains to sellers that commission means the agent takes the risk. Fees mean the seller takes the risks.

5. Divide your services into functional and fiduciary responsibilities and explain the liabilities of each.

Many tasks that a Realtor performs such as creating feature sheets and holding an open house can be done without assuming fiduciary responsibility. Fiduciary responsibilities are those associated with representation and liabilities. Explaining the difference between the two types of representations can be helpful to your seller in understanding the significance of agency.

6. Make sure you are compliant in your state and local MLS if you offer fee-for-service.

There may be regulations in your state which require you to call fee-for-service a marketing fee or consulting fee.

Wasserman points out that in her local MLS, a listing means the seller is being represented by the agent. By statute, agents are not allowed to take a listing without acting as a fiduciary to the seller.

7. Test market realities

Expanding a business model can be scary - will it ever spring back to previous levels of profitability or are higher profits possible in another direction? That's something only you can decide, but to see which is better for you - full-service or fee-for-service, you have to start with what your broker will allow.

Some brokers do not want to cut fees, period. If you are an agent for such a broker and you want to test the waters, the best way to do so is not to test the theory, but test the reality - with a bona fide listing agreement. Fees are negotiable by law and the broker knows this. If you think you have done the best job possible and there was no other way to capture the listing except through a fee-for-service contract, then the broker may allow the contract to proceed.

Published: May 10, 2000

Use of this article without permission is a violation of federal copyright laws.

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.