For Managers
Best Practices
Taking the fee-for-services plunge
So-called menu marketing isn’t just for specialty brokerages anymore.
BY ROBERT FREEDMAN
Consumers are demanding it, and more brokers are providing it: set fees, by the hour or by the type of service, rather than a basic commission.
The rise in Internet home shopping and the growing number of nontraditional brokerages are pressing many real estate companies to take a serious look at fee for services.
So far, it’s still an area that’s dominated by specialist brokers such as Help-U-Sell and Assist-2-Sell and by Internet entrepreneurs trying to grab a slice of the for-sale-by-owner market. But more traditional brokerages are taking the plunge, or making plans to.
“Consumers are demanding fee for services,” says Michael Lee, CRS®, GRI, who owns Realty Unlimited in Castro Valley, Calif., and gives seminars around the country on how to add a fee-for-services component to your practice. “With the Internet, consumers can do so much more themselves. At the same time, they want professionals to help them with the technical parts of the transaction.”
“There’s no doubt that more buyers want to go directly to sellers,” says Rick O’Neil, president of Help-U-Sell, headquartered in Syosset, N.Y. “And if they want to do that, we can help them. We can help them as much or as little as they want to be helped.”
Ken Bruderle, former broker-owner of Realty Executives Advantage, a 20-salesperson office in Elgin, Ill., started dabbling in fee for services a few years ago, and now about 10 percent of the company’s business comes from “menu marketing,” another name for the practice. Bruderle now divides his time between selling and providing fee-for-services training.
“The purpose of offering fee for services is to pick up business you’d normally never get, such as die-hard FSBOs,” Bruderle says. “You educate them about what needs to be done to get their house sold, then find out what they can or want to do themselves, and suggest what you can do for them. People who are business minded see this as a fair exchange. The more they do, the less they pay you. It’s all about educating them on everything a practitioner does in a transaction and putting a value on those services.”
Even 100 percent commission RE/MAX go-getters are testing the waters. “I’m not marketing what I’ll do on a fee-for-services basis, but I want to be prepared in case someone calls me for a particular service,” says Dean Nikodemski, an associate with RE/MAX Metro, Charlotte, N.C. “I’m not wedded to the old school; I want to make things work in this new environment.”
Nikodemski says he’s done a handful of services on a fee basis but hasn’t yet listed a property in the MLS for a fee. His broker is still looking at fee ideas, he says, and currently sees them as tools for generating listings.
The package model
Brokerages that specialize in fee for services generally structure their plans around a few service packages, rather than offering a list of individual services. The aim is to capture discrete slices of the market that want different degrees of service.
Help-U-Sell, the country’s oldest national fee-for-services franchise, and Assist-2-Sell, based in Reno, Nev., both structure their programs around a few basic packages, though they’ll also provide individually priced services.
Assist-2-Sell divides its services into three packages:
1. Paperwork only, in which FSBO clients who’ve marketed their property themselves and found their own buyers get help filling out forms. Fee: $495— $1,000.
2. Non-MLS marketing, in which sellers get a complete marketing program without the MLS listing. Marketing includes local media advertising, Internet postings, provision of signs and brochure boxes, and publicity in an in-house publication. Fee: $1,495—$2,195.
3 .MLS marketing, in which sellers get a complete marketing program, including MLS listing. Fee: On a percentage basis; commission split if sold by an outside practitioner.
Contrary to what you might think, practitioners from other real estate companies are more than willing to show listings not on the MLS, says Mary LaMeres-Pomin, cofounder of the Assist-2-Sell franchise and Assist-2-Sell office owner. The key is developing a professional working relationship with them.
What is your time worth?
Practitioners who work solo also have found success structuring their services around a few packages. Lee of Realty Unlimited says he’ll prepare a marketing plan and provide signage and brochures for $750, and will list the house in the MLS for another $250.
For a package in which he’s providing everything typically provided under a commission deal, he charges up to $12,000. That’s a modest amount for his Bay area market, in which the median home price is $400,000. “If your house is under the median, it might make sense to go the commission route,” he says. “But if your house is above the median, you can save a lot of money.”
If you charge by the hour, a simple calculation will help you make sure you’re not cheating yourself, Lee says. “Take the net income you want to make for the year, add back your expenses to get your total gross income, divide that by the number of hours you’re willing to work, and that’s what you charge an hour,” he says. “The key is to figure out what your time is worth.”
Solid processes
A desired side effect to fee for services is increased volume, so it’s critical to have the right infrastructure in place, say brokers.
Assist-2-Sell spent years developing an administrative model, and now even a small office should be able to process dozens of transactions efficiently at one time, says LaMeres-Pomin. Brokers can benefit from the two-pronged model--team selling and high regimentation--developed by Assist-2-Sell to make fee-for-services function efficiently in your office.
Assist-2-Sell teams are organized by specialty, with one person handling buyer representation, for instance, and others handling sellers, property marketing, and so on. But all practitioners are prepared to work on any deal in any capacity.
“Customers don’t have to talk to one person,” says LaMeres-Pomin. “You can talk to any Assist-2-Sell practitioner.”
One advantage to this arrangement is marketing might. All the company’s resources are deployed for each deal so that marketing penetration doesn’t rely on the capabilities of one practitioner. “Sellers don’t have to worry whether the practitioner has the financial strength to market the house thoroughly,” she says.
High regimentation is also key, otherwise an office would get overwhelmed by the high volume that fee for services can generate. “You need a system for making sure that for each property, the marketing is getting done, the pricing is done right, and so on,” LaMeres-Pomin says.
At any one time, she says, her office, with just a handful of licensees, is carrying about 200 listings. That’s far above what you’d find in a typical office, where associates rarely carry as many as 40-50 listings each, LaMeres-Pomin says.
Avoiding trouble
If you’re thinking about adding a fee-for-service component to your business, keep in mind a few cautionary notes, says Lee of Realty Unlimited.
First and foremost, know your state’s laws thoroughly, because sticky issues can arise. While in most cases real estate professionals are permitted to “fill in the blanks” of form real estate contracts, if a client asks you to fill out the sales contract without performing any other service, that could be construed as the unauthorized practice of law.
“You can usually complete a form contract as part of a transaction,” Lee says, “but if you’re just doing so without providing any other services, you could be breaking the law.”
Also, carefully weigh what you’re being asked to do in light of agency liability. If you’re just preparing a CMA for a few hundred dollars, you probably don’t want an agency relationship with your customer. Once you become a person’s agent, you assume the highest liability that’s recognized by law. “You don’t want to become someone’s agent unless that person is compensating you appropriately,” Lee says.
And check with your errors and omission insurance provider. “Providers see danger in your accepting agency responsibility and not getting paid appropriately,” says Lee. “You have to explain to them how your program will work.”
Lee also suggests that a business plan be developed to address services, pricing, and how to split fees with associates.
Bruderle says that in the end, traditional brokers not sure whether to take the plunge should view fee for services as a device for building a relationship with customers whom they wouldn’t otherwise get. It shouldn’t be seen as a discount practice that undervalues the services practitioners perform.
“If you enter into a fee-for-services relationship with a customer who doesn’t understand the concept, you’ll get in trouble,” he says. “You have to spell out that they’re agreeing to do certain things, that you’re agreeing to do certain things, and that there are certain things that you’re not agreeing to do. If that’s not clear, everyone will end up disappointed.”
