An Introduction to Real Estate Consulting

As a way of explaining the J S Harper structure and our unique consulting services it is helpful to first look at traditional models of real estate practice.

In the traditional model, the seller is charged with the responsibility of paying commissions to both the listing agent and the selling agent through the standard listing agreement.

In our home state of California, the traditional agreement specifies the commission as a percentage of the Sales Price to be deducted from the seller’s proceeds on successful closing of the sale. This “gross commission” is then split between listing broker and the selling (buyer’s) broker under a predetermined split as identified in the Multiple Listing Service (MLS) display of the property. The split commissions are usually then split again between the agents and their employing brokers.

This model is flawed. Let’s just look at a hypothetical commission of, say, 5 percent of the sales price. You know that commissions are negotiable, but we will use 5% for discussion.

Now let’s say that an agent has two listings that close – one is a $250,000 home and one is a $1.5 Million home. The commission on the $250,000 home is $12,500 and the commission on the other is $75,000. Six times the lower priced home!

That is a flaw.

Same flaw applies to Buyer Agents: Does it really take 6 times more effort time and skill to sell the million dollar home as it does the smaller one?

Consumers Want to Be Involved!

Now let’s factor in the new age of information and consumer empowerment we are fully involved in. Sellers have access to Internet-based information and marketing venues. Buyers have access to property listings and comparable pricing information. Does it surprise anyone that the newly empowered consumer feels that they can and should take a more active role – particularly when they already feel that fees are not equitably charged for services rendered?

To Date - No “Real” Change From the Industry

In an effort to capitalize on this trend, and without understanding the implications, many real estate companies and others have created what they think will make consumers happy once again. Often this takes the form of the LSDB (Limited Service Discount Broker) where the broker offers some huge rebate or even flat-fee discounted fee for some pared down version of real estate service. These companies dream up some form of service, package it and price it below the traditional percentage-based model in the hope that consumers will run in their direction. Unfortunately, they don’t see usually hit the mark.

More often than not, discounted brokerage comes with service that is still not exactly what the consumer wants! Each consumer is different – with entirely different wants and needs. And a packaged plan, however discounted, does not usually make sense.

Making Sense of It

What makes sense are professional services that closely fit the desires, capabilities of the consumer without scrimping on the fiduciary obligation of agency as defined by the State.

Enter Real Estate Consulting

We have identified, after countless hours and many years of industry experience, distinctly separate areas of tasks that can be defined as Functional and Fiduciary. The Fiduciary tasks carry with them the implication of an agency relationship – one in which the agent has direct responsibility and liability to the principal – or consumer. Such Fiduciary tasks include but are not limited to such activities as contract negotiation, property pricing advisory, disclosure advisory and more. Once the agent performs these duties, an assumption of an agency relationship is there.

The Functional tasks, on the other hand, are not clearly agency-creating. Such tasks as holding an Open House, creating and printing a flyer for the property, running print and online ads and more can be performed by the consumer without the concern that the agent has failed in his capacity as a fiduciary to the seller.

At J S Harper, we have defined three specific types of relationships/services:

1. Specific and/or general service and advisory on a per-hour basis
2. Pre-packaged service groupings, such as Property Marketing, Closing Services , Property Valuation, Buyer Property Locator, and many more. These services are clearly defined ad are priced based on typical costs and time/skill requirements
3. Full Service Brokerage: These services are on a contingency basis in that we only get paid on successful completion of our agreement, however we are paid at standard percentage fees for our risk.
   1. Seller Brokerage – traditional percentage based model
   2. Buyer Brokerage – Absolute fiduciary responsibility to the buyer and percentage based fee model.

Pricing for these services varies with the level of service, time required, skill required and whether you need the services of a senior partner or not.

Our Initial Consultation is designed to help us – you and J S Harper – determine the best service relationship for you and your needs. We do not charge for this consultation. If you would like to see if what we offer is what you want, please feel free to call us.

We would like to add our thanks and credit to Mollie Wasserman, whose book "Ripping the Roof Off Real Estate" has helped us to become more clear in our purpose.