If you’ve been in the real estate business any length of time, you’ve undoubtedly questioned “why do we give away so many services for free?” Answer: “It’s just the way things are done. It’s tradition.” True, albeit myopic and counter productive to the broker/salesperson’s bottom line.

Much in the same way a new drive-in restaurant offers 29-cent hamburgers to lure customers, the real estate industry offers a variety of “free” services to attract and ingratiate potential consumers. But the bizarre difference is that the real estate industry has hosted this “free” ongoing promotion for more than one hundred years! Not only is it bad business; the fact is - it’s no longer working.

Then why are free services unfortunately on the rise in our industry? Do consumers trust them? What we can do to turn the tide to help capture consumers for life?

Why Consumers No Longer Trust "Free"

It happens to all of us. Just as we sit down to dinner, a telemarketer calls, pitching a free trial, a free subscription, free something. It could be a great offer, a viable offer, but we turn a deaf ear and hang up. We dislike the intrusion and have come to distrust offers of “free” anything. The outcome with free is that someone else typically wins while we end up losing and/or paying. Products/services that are available 24/7/365 for free are assumed to have little intrinsic value and are ill respected by most consumers.

Why “Free” Is Dangerously Out Of Control In Real Estate

In most industries when profits decline, business is re-engineered. Free services are limited, profit centers are added and new approaches streamline costs to trim overhead.

But when times get tight in the real estate business, just the opposite occurs. Additional free services are added in the hope of attracting the few consumers available in the market. And when a market downturn is complicated by a full-blown economic recession, the amount and cost of “free services” to attract and maintain inventory escalate out of control.

It boils down to the fact that “free” in any industry is an oxymoron. Each and every activity/service carries its own degree of overhead for running the enterprise including insurance, marketing, employees, etc. In fact, one of the most abused services is the amount of supposed “free” services squandered by real estate salespeople.

Until each one of us determines what an hour of our time is worth and be willing to write a check for every hour spent (for most of us it’s between $75 and $200+ per hour), we will misguidedly attempt to compete with “free.” As seen in previous recessions, many real estate people are forced to leave the business not solely due to a lack of sales, but from the sheer cost and mismanagement of “free.”

“Free” In Real Estate Does Long-term Damage

The categories of free in real estate are legendary: free property showings, free open houses, free broker opens with “free” lunches and the list goes on and on. Perhaps most problematic is the free comparative market analysis (CMA) especially in view of the fact that 85% of consumers polled felt that it was the most important service provided them as a seller (per my “Frugal HomeOwner®” survey of 1998). If consumers deem it so valuable, why are we giving it away?

Let’s rethink the comparative market analysis. If its primary purpose is to help the professional and the consumer determine the price for and the salability of the property, it serves as a diagnostic tool. In other professions when a diagnosis is rendered, there’s compensation for it---even if the diagnosis renders bad news.

By providing the consumer with a free CMA, it gives him ammunition to: 1) sell the property on his own; or 2) use the CMA as leverage with a competing agent in your marketplace. Either way, “free” has just cost you money! And where professionalism is concerned, you don’t see many brain surgeons educating the consumer with “free” information on how to perform a do-it-yourself lobotomy! Unfortunately, re-thinking “free” is an inside job---we have to believe there’s merit and value in what we do before we’re emotionally capable of putting a dollar sign on it.

If you’re not initially comfortable charging for a CMA, take a walk-before-you-run approach---don’t leave the CMA with the consumer. Instead, state that it’s part of your stock-in-trade (as it’s always been with appraisers); and that if the consumer wants a copy of it, it’s available for $X. Over time, you’ll come to respect the time it takes you to compile the CMA, present and explain it to the consumer, not to mention the “free” time examining/evaluating the property.

Then you’ll be comfortable to charge for that service, and others.

Published: July 18, 2002

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Julie Garton-Good, DREI “The Frugal HomeOwner™” As a syndicated newspaper columnist, author and international speaker, Julie Garton-Good DREI, C-CREC™, is called “America’s Home Affordability Expert”, addressing more than 25,000 persons annually on topics of real estate industry trends and home affordability. She is the author of five real estate books and is the sole two-time recipient of the international "Real Estate Educator of the Year" award from the Real Estate Educators Association. In 1997, The National Association of Realtors® nominated Julie as one of the fifty most influential people in the real estate industry. She shared the list with only three other women.