As a broker of twenty-six years, I’ve always had a problem with how our industry is designed. We spend eons of time consulting with buyers and sellers---for free. We receive no up-front fees, even though we’re expected to expend hundreds of dollars per listing (our stock in trade, even though we have no control over it) just to make the phone ring (as well as appease the seller, even though he has no earthly idea what goes into a marketing campaign!) We then spend dozens of hours each month driving buyer prospects around educating them, often to have them purchase from someone else---oftentimes a for-sale-by-owner. And last, but certainly not least, there’s the concept of service---we service the seller, we service the buyer. We provide service at every turn, hoping that the consumer will see value in all this service and reward our efforts by selling or buying with us. Then, and only then, do we get paid. Correct me if I’m wrong, but is it likely that Bill Gates or Mary Kay Ash would use our current real estate sales model to design a multi-billion dollar business empire! No, I don’t think so either.
Service does not equate with results
I believe that too much service may be part of our industry’s problem. Think about it---that which is readily available and given freely is often discounted. And are there times when too much real estate service could actually break down communications with the consumer, causing us to move away from, instead of toward, results?
Let’s say that you’ve had a seller listed for four months with very few showings. You service the seller, ad nauseam, mailing ads to him, calling on a weekly basis---even holding a broker’s open. If you could just get an offer on the home, you think you could sell it to the owner. After all, you’re keeping him informed with copious service.
Meanwhile, the seller is thinking, "If that agent would just DO something to get this house sold! He keeps wasting his time calling me and sending me all this mail, when all I want is this house sold!”
Extended into the future, the seller is likely to change companies, assuming that the first agent/company was incapable of achieving the seller’s desired result of selling the house.
True, seller’s don’t really understand what we do. But perhaps part of our problem as professionals is that we haven’t prioritized the aspects of our business that SHOW value. We’ve been "majoring in minors” as the phrase goes; and we’ve awakened to a brave, new world where cheaper, more flexible, online products are empowering consumers and replacing much of what we’ve previously done as real estate agents.
Consumers want results, not service
One reason our current real estate model is irreparably broken is that we erroneously equate service with results. In today’s "one size no longer fits all” environment, this couldn’t be further from the truth! That shop-worn yard sign on the seller’s lawn does no good for the agent’s/company’s image. In fact, it screams that "we haven’t gotten the job done---but we’re servicing you to death in the meantime!”
You’re probably saying, "Julie, this is the way we’ve always helped people sell and buy real estate!” While it may be the old way, it ain’t the only way! What if we could throw out the non-productive, activities (those that could be done by someone else, maybe even the seller) like showing the house, in exchange for concentrating on our professional, personal, high-level talents like negotiating and troubleshooting the sale? If you had an ironclad agreement with the seller, what would be the harm in having him show the property---(being the one to announce, while touring buyers "This is the kitchen”) especially if it could free you up to render higher-level, more personalized, more valuable skills---and get paid for them?
"What about the control issue?” you ask. Wouldn’t the seller and buyer find a sneaky way to get out of paying the fee once they got together? (My retort, "And they don’t now?) It’s been my experience that far fewer people haggle with professionals whose performance is incumbent upon a high-skill level (like a brain surgeon, or a CPA defending you against the IRS) especially when the skills can’t be duplicated by automation or technology. That professional has a much easier time getting paid and perfecting a niche as an invaluable, and necessary piece of the business puzzle in the new millennium.
Our skill model is upside down
In fact, when you look at what the consumer perceives we charge the majority of our fees for (showing the house, keeping the seller informed, driving buyers around) it’s no wonder our industry is in a state of turmoil. If you turn the skill model upside down, we should be giving away what we’re perceived to charge for, and vice-versa! For example, instead of "throwing in” almost as an afterthought the negotiating and advocacy services, burying them deep in the added-value aspects of working with an agent, we should reframe them, prioritize them, and CHARGE for them! (Wow---what a novel concept---getting paid for our hard-won skills!) Contrarily, we should avoid, delegate, and/or reprioritize those activities (like showing property, driving buyers around, etc.) that could be performed by the seller, a licensed personal assistant, or a chauffeur. (When was the last time you saw an attorney escort his client to court?---besides OJ, of course---but Cochran was well-compensated for it!) Until we invert our skills pyramid, we will not be perceived as professionals who are consistently and justly compensated for their skills.
Reinventing ourselves as consultants
In my latest book, "The Frugal HomeOwner’s Guide to Buying, Selling, and Improving Your Home ” I address how FSBO’s launch headlong into selling their homes, often becoming gridlocked in what I call "the meat in the middle of the transaction.” The web assists them in accessing signage, writing ads, and other non-personal services, but they call on agents to save the transaction (being adequately compensated) for these unbundled, a la carte services.
This latest wave of consumerism is not meant to threaten agents, nor their brokers/brokerages, but give them the opportunity to reinvent themselves as well-paid consultants, mixing in the ability to render high-skilled specialty services (for hourly, flat, or percentage fees) while continuing to list and sell real estate as in the past. The research I’ve done on the topic of real estate agents as fee-paid consultants points to the fact that this new approach will not destroy the current brokerage framework, but accent it, giving life to new revenue sources within the brokerage---and greater consumer’ allegiance to the industry.
In Part II of this article , we’ll examine how the real estate transaction can be unbundled, allowing agents to reframe their job description by mixing fee-based consulting with current listing/selling activities. Additionally, we’ll apply this concept to tailor-made, results-oriented real estate menus for consumers, focused on delivering what the consumer needs, when they need it---and in the process, elevate the real estate business to a new height of professionalism.