Extreme Makeover – Real Estate Edition – Part I : Your Value Proposition

Jack,

Your ideas are great. I encourage agents and brokers to adopt a consultant mindset. The natural extension of that is that their consulting service fees should be set differently.

Interesting - I'll be back to hear what others say.

Kathleen

Jack,

Thank you for starting this group. I agree that honest, progressiving thinking on this topic is LONG OVERDUE!!! For years, many of us have been saying that if we don't adapt our business in a way that MAKES SENSE to the consumer, someone else will. And those of us still in the business at all will likely not like the changes that those outside forces wind up making. The fact is that CHANGE is happening. The choice each of us must make is whether we want to be proactive and help to orchestrate that change in a way that's good for our clients AND ourselves, or do we simply want to sit back and wait for whatever is going to happen TO happen, and simply try to survive the fallout. To me, that makes very little sense at all!!!

I absolutely agree with you that CONSULTING is the future of real estate. The day we became charged with the responsibilities involved with fiduciary is the day our roles as "sales people" became numbered. And rightly so. The "one size fits all" commission paid at close of sale model being guarded so vehemently by brokers and agents alike has long since outlived its usefulness as "THE" way to conduct real estate. Now, I don't believe for a minute that it will disappear. What I do believe, however, is that the practice should be ONE of the tools in our toolbox that we offer customers and clients....it simply should not be THE ONLY tool we have to offer.

I also believe that whoever came up with the idea of the FREE CMA should be drawn and quartered! There is nothing whatsoever free about it!!! It's not free to the agent preparing and presenting it....and it most certainly is not free to the consumer...they simply don't understant HOW they are paying for it.

Hopefully through dialogues like the one you've begun here with this group we can help one another formulate how best we can serve both our clients and ourselves intelligently and professionally.

Thanks Kathleen, Judi and all of our new members. We are on the verge of something great.

Please tell your friends about this group and also please feel free to post your thoughts here. This can be an industry-changing movement. Our friends at the ACRE program - visionaries that include Judi, Merv, Mollie, Paula and others - have ignited a candle that can grow into a firestorm. I also invite all to visit the ACRE program. They are a RealTown Approved group, I am sure.

I am passionate about this as I know you all are. Please feel free to post your thoughts, questions and ideas here. I will tell you that I have designed my new company to be completely based on the consulting business model. I am not certain, but I think we are the very first company designed for consulting for the residential real estate industry.

I plan to keep updating this group as we grow, I will share the good as well as the not-so-good things we come across. This might help us all. Now the good news for the week. I have opened in Santa Rosa - in the North Bay Area, with the addition of my first new consultant. As we are a totally virtual company, we can grow in a wide-ranging area relatively easily.

She is focused on a niche serving senior homeowners. This should be perfect for her. I will keep you posted.

Jack,

What beautiful comments about ACRE®...thank you so much for bringing it up, and with such a nice endorsement as well! And yes, we are a RealTown approved vendor...thanks for mentioning that as well. Anyone looking for information about the program, which is designed for agents who are interested in offering a broader range of alternatives to their clients and customers, AND who respect their own time and worth and are interested in being compensated appropriately for that time and talent (irrespective of whether there is a transaction or not, or a closing or not). Information about ACRE® is available by clicking these links, or everyone is invited to email me at ACRE_RT@homeslady.com. I've developed an autoresponder with lots of information and access to resources that'd be very helpful to learn about the program as well as how offering Consulting services can benefit the agent as well as the consumer.

But this group is all about CONSULTING ...not just about ACRE. One of the things you brought up in your original post, Jack, which I LOVE by the way, is DETERMINING YOUR VALUE PROPOSITION! As an industry, we are long overdue in behaviors that elevate our values to ourselves as well as to the consumer. With all the media hype about "whatever makes an agent worth 6%", the consumer's perception of what we are (as an industry), where our VALUE is, what we do, etc., really get's lost in the wake. WE know, first, that RARELY does any agent "get" 6%. But public perception is that we do...and the MEDIA loves to use that number because they can! After all, many times that is what the consumer PAYS (which is not to say it's what the agent GETS...but the reality would have much less negative impact).

I think it's amazing that you've taken the step to launch your new company strictly on the Consulting model. We'll all be interested in watching you grow and evolve as time goes on. Maybe if we look into our crystal ball 5 or 10 years down the road we'll see your fledgling company has branched out all over the real estate landscape bringing OPTIONS to the consumer and RESPECT to our industry! You should be very proud of the bold, innovative, and forward thinking steps you're taking!!!! When I talk about consulting that way, many times my industry colleagues say "it's a radical change in thinking...it'll never become "mainstream"" ... and to that I ALWAYS respond with "which is EXACTLY what they used to say about BUYER AGENCY....and not really all that long ago!" Sometimes we need to remind ourselves that our industry HAS changed...and, more importantly, it MUST change. Think about it...where was the internet when buyer agency was introduced? That was in the early to mid '90s. MOST agents at that time did not have a computer...there was very little in the way of a "web presense"...not just by agents, but by companies as well! And STILL buyer agency not only became "mainstream"...in most areas of the country it is now the "default" way in which an agent works with the buyer. The presence of the internet is insuring that new ways of thinking and working gain exposure at lightening speed!

I too am excited about this discussion and hope we get LOTS of participation!!!

JudiB

JudiB said,

Jack,

What beautiful comments about ACRE®...thank you so much for bringing it up, and with such a nice endorsement as well! And yes, we are a RealTown approved vendor...thanks for mentioning that as well. Anyone looking for information about the program, which is designed for agents who are interested in offering a broader range of alternatives to their clients and customers, AND who respect their own time and worth and are interested in being compensated appropriately for that time and talent (irrespective of whether there is a transaction or not, or a closing or not). Information about ACRE® is available by clicking these links, or everyone is invited to email me at ACRE_RT@homeslady.com.

I want to reiterate my personal support for the ACRE®...program and the terrific pioneering work that they do. If you have ANY interest in the consulting business model, you owe it to yourself to at least look at the videos that are available on youtube.com. Simply visit http://www.acreonyoutube.com/ for more information.

Jack

Some have suggested that this forum would be a great place for all of us to work together on developing a list of tasks we might call our Schedule of Services.

My company has three types of service:

• Seller
• Buyer
• Miscellaneous

Within those types, we offer hourly, bundled and full service plans

Within Full Service, we offer contingent-on-close high rate fees and non-contingent pay-on-milestone lowered fees.

What kind of fee structure do/would you have? What specific tasks would/do you include?

This could be a great way for us all to share ideas.

Jack

Copyright ©, 2008, Jack Harper, All rights reserved

Hi Jack,

Here's a specific regarding a seller: I am doing a short-sale. The seller is in major trauma. He lost his job several months ago, he's a new father (1 1/2 weeks ago - Many more expenses). He and his wife purchased the new home at a time when the market was expanding and she wasn't even pregnant.

Like the ebb and flow of the tides, the market is receding - a lot. The clients don't even want to address the bank forms; all those items required to move forward. So, these duties become mine by default. As you know, short-sales are labor-intensive. How do you establish a value on this program?

Here's another reality. Forget what you hear and read in the seminars and rah-rah books. After the transaction is closed and the clients move on with their life, they will not want to remember me because I represent a negative time in their life.

I think it would be easier to represent Britney Spears in a divorce action. Her attorney is getting $450,000 for 4 months work. As a certified paralegal, I know what kind of time and effort is involved in a divorce claim. Go figure!

Diana Russell said,

Here's a specific regarding a seller: I am doing a short-sale. The seller is in major trauma. He lost his job several months ago, he's a new father (1 1/2 weeks ago - Many more expenses). He and his wife purchased the new home at a time when the market was expanding and she wasn't even pregnant.

Like the ebb and flow of the tides, the market is receding - a lot. The clients don't even want to address the bank forms; all those items required to move forward. So, these duties become mine by default. As you know, short-sales are labor-intensive. How do you establish a value on this program?

Jack responds:

I loved your comments about it being easier to represent Britney S. in a divorce. You may be right.

Diana, this is, sadly, similar to the unfortunate tales we hear all over the country and at all financial levels - not just the young new parents. Short sales are heart-wrenching work. On the plus side, we are actually helping people in some cases.

I would establish a baseline fee that takes a hard look at what are the probable hours and expertise you need to invest to get the results you and the client want. Take into account the reality is that they want you to do all the tough stuff and they want to live in the new form of denial that we are seeing in some instances.

Once you establish the hours, then it is time to determine the per-hour charge. Maybe you can have them commit to the baseline, be open to additional hours as needed and mutually agreed, then put a cap on the whole agreement that you will not go above.

This is just my opinion. I would love to hear from others.

Jack

Copyright ©, 2008, Jack Harper, All rights reserved

I agree with you both, short sales are so traumatic, not only for the client, but also for the agent. Being in Florida, I've become well versed with them by now and can offer a few idea's now - more later after the Hurricane decides what is going to do and I play catch up while we have power.

THE First thing to know is would they rather STAY in the home? If so, it may be best to charge them to do a mortgage mod or a forbearance with their lender. That is much easier than a short sale.

If this is an improbability, then you have other resources to help. The first thing I do is get a borrowers authorization signed so I can talk to the lender. Not all lenders are alike, some know what they are doing, others don't. That will tell you how much time it will take to get it done (or at least give you a clue). You can also still do a traditional commission, as the lender pays that out of their pocket, with maybe a retainer from the sellers if they can do it.

The possibiities are endless, but it all starts with the question of what the client wants, to stay in the house if possible, or not?

Here in FL it can take many, many months to foreclose since we have so many of them. In the meantime, the lenders have to make the tax pmt, HOA if there is one, hazard insurance, hire an attorney, get a property manager to take care of the house and/or hire an agent to take care of all of this and pay that agent to sell the house when it is all said and done.

The fees and time to do all of that can be MUCH lower than doing a short sale. Additionally, depending on the type of loan and investor, they are unable to borrow more money from the Fed's to loan out to others (which is where they make a profit) should their percentage of non-performing assets be over a certain range. This will also make a difference in how they are willing to proceed.

I'm in the midst of doing a short sale on a commercial subdivision right now, lol! A first for me, and what a challenge, but I love challenges ;-)

If anyone has any other questions, I'll try to come back later for a response, hopefully if Fay gives us a break and the power doesn't keep going out.

Paula Bean

Orlando, FL

Jack Harper said,

Diana Russell said,

Here's a specific regarding a seller: I am doing a short-sale. The seller is in major trauma. He lost his job several months ago, he's a new father (1 1/2 weeks ago - Many more expenses). He and his wife purchased the new home at a time when the market was expanding and she wasn't even pregnant.

Like the ebb and flow of the tides, the market is receding - a lot. The clients don't even want to address the bank forms; all those items required to move forward. So, these duties become mine by default. As you know, short-sales are labor-intensive. How do you establish a value on this program?

Jack responds:

I loved your comments about it being easier to represent Britney S. in a divorce. You may be right.

Diana, this is, sadly, similar to the unfortunate tales we hear all over the country and at all financial levels - not just the young new parents. Short sales are heart-wrenching work. On the plus side, we are actually helping people in some cases.

I would establish a baseline fee that takes a hard look at what are the probable hours and expertise you need to invest to get the results you and the client want. Take into account the reality is that they want you to do all the tough stuff and they want to live in the new form of denial that we are seeing in some instances.

Once you establish the hours, then it is time to determine the per-hour charge. Maybe you can have them commit to the baseline, be open to additional hours as needed and mutually agreed, then put a cap on the whole agreement that you will not go above.

This is just my opinion. I would love to hear from others.

Jack

Copyright ©, 2008, Jack Harper, All rights reserved