A la Carte Fees & Fee-for-Services Agreements.

For-sale-by-owners are voting with their wallets, purchasing the unbundled real estate services they need, when they need them. But are there any consumer cautions when purchasing fee-for-services a la carte? And is a written agreement necessary when contracting with a professional; and if so, what should it contain?

The true unbundling prototype, a la carte fee-for-services allows the consumer to choose what he needs, paying a price for each individual service or group of services. For example, an agent might charge a seller "x" amount of dollars to "stage" the home for showing, "y" amount for screening buyers to make sure they’re pre-approved for a loan, and "z" for lockbox and yard signage rental. Or the agent might provide the entire bundle of services to close the sale once the seller has located the buyer.

When paying for a la carte services, there are two consumer cautions:

1) Don’t be tempted to gravitate to the lowest-priced service. Instead, focus on the services that will provide the results you’re looking for, i.e. quick sale, highest price, etc.

2) Don’t let the sum of the parts exceed the whole! In other words, if you find yourself needing more help from the professional than initially planned, it may be wise to change to a different compensation model with the professional--- one that provides exactly what you need in a more cost-effective manner.

It’s wise to use a written, detailed fee-for-services agreement. Not only can you determine exactly what you’ll receive, when you’ll receive it, and the compensation you’re paying, it’s a great tool to schedule periodic check points with the professional. Checkpoints built into your fee-for-services agreement keeps you on track, makes the professional responsible for checking in in a timely fashion, and allows you to determine any additional services you may need, ideally before you need them!

What type of clauses and language comprises a fee-for-services agreement? I suggest that you use a listing agreement as a loose template to structure your agreement. It will provide the who, what, when, where, why, how, and how much of your agreement as well as show you clauses typically included in most real estate service agreements. These include (but are not limited to) the nondiscrimination clause, the severability clause, the assignability clause and the dispute resolution/mediation clause.

Depending on the real estate licensing laws in your state, you may have an option regarding the relationship you form with the real estate professional providing fee-for-services. A client relationship means that the agent is representing your interests and is able to advocate and negotiate on your behalf. While this can be advantageous, not all real estate services require this level of service from the agent. That’s why some states allow real estate licensees to work in a more neutral capacity as transaction brokers. Under this relationship, the licensee would provide you with information, but would not advocate nor negotiate on your behalf. The licensee is responsible for disclosing and explaining the relationship options available to you before beginning any business relationship, documenting your choice in the fee-for-services agreement.

Be sure that any fee-for-services agreement you sign clearly states how the business relationship can be severed. Although most professionals won’t force you to remain in a situation you aren’t happy with, most contracts require that certain provisions be met before severance can occur. These usually consist of payment of all earned fees and possible forfeiture of retainers placed with the fee-for-services professional.

And what about retainers? Are they necessary when a FSBO requires help? We’ll discuss them, as well as how using fee-for-services could help reduce your risk, even as a successful for-sale-by-owner, in the next segment of this series.

Published: July 7, 2000

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