Adopting the Consulting Model - What do You Need for Support?

In trying to foresee what kind and how much training and support we might need to successfully make the transition from traditional-only to consultative business, I have come up with a few things:

• Company Management Awareness - will the management understand this new model well enough to help you succeed?
  
• Field-level Training - we will need the current and any new industry educators and coaches to understand your specific needs in this transition.
  
• Technology Support - where will the systems come from that we will use to drive the business?
  
• Back-office Systems - how will the company adapt on an accounting basis to help you bid, contract and receive payments for this new way of billing clients?

What other support and training issues do you experience or foresee in the consulting model?

Jack

Jack,

Excellent topic! I think there are some core level issues that also have to be addressed on a state by state basis having to do with licensing laws and restrictions within those individual states. For example, in a couple of states there are very stringent restrictions against anyone other than a licensed appraisal CHARGING for appraisal-like services. Real estate agents are more than welcome to do a CMA for a consumer...just as long as they don't get paid for it!

Resources need to be developed to help agents identify those restrictions specific to their market areas...and then assist them in challenging those restrictions and/or adapting to them in a manner that makes sense...both for themselves and for the consumer.

Eventually, it seems that some of the basics (like real estate listing agreements, buyer agency agreements, sales contracts, etc.) will need to be developed that provide for alternative and flexible pricing for servces, as well as defining methods and timing of payments for services. I think that would fall in your "back office" section...I just thought it should be spelled out because I know so many agents at this point are simply using their "traditional" paperwork, and adding various addenda to those documents that define what's to be done, who's to do it, when it's to be completed, when payment is due, etc. Several of our ACRE members have offered up some samples of what they're using (numbers not included).

Not to be overlooked also are any tools that might be used with the consumer to help them really understand, in dollars and cents, what their options are and the impact of chosing those options. One of our ACRE Coaches (who came from a consulting background), Merv Forney, developed an amazing Excel spreadsheet (using that term definitely DOES NOT do the tool he's created justice!!!!) that's available to our ACRE members which clearly demonstrates for the consumer the costs, benefits, and likely impact of chosing (or not) various alternatives, giving them the transparency I think most consumers want from our industry ... something that until now has been sorely lacking.

And finally, how we market to the public needs to be adapted to accommodate this huge "shift" in how agents could be assisting them. I'll be attending a seminar next week being put on by Gary Keller who is apparently on his "Shift" tour discussing his new book and how agents can expect to adapt. I'm very eager to see how the consulting model fits into his vision of our shifting industry. Currently, despite the influx of "alternative" models into the real estate industry over the last decade or so, most consumers still have no clue what we do, where our value lies, and what they are really paying for. We need to develop new marketing strategies that help put all that into perspective in terms that the consumer can readily understand. Until now, I don't think that's been done.

I'll be curious to see how your list expands, Jack. Thanks for bringing up this topic!!! I think it's one well worth active discussion and input!

Quoting Jack Harper:

What we are talking about here is a very significant change to how we each do business on a daily basis, assuming we actually do make the transition. These changes will probably not come quickly or easily.

Paula Bean Replies: You are spot on Jack! People don't like change, but as they say 'the only thing constant IS change"

There are a few resources out on the Internet, there is a book, there is a private designation. . . all designed to help you make the shift from purely traditional to consulting business. Mollie W. has her "Ripping the Roof Off Real Estate" book, there is the ACRE private designation course and there is the ConsultingTimes web resource for ongoing support of those who have the ACRE designation.

Paula Bean Replies: IMHO, one were to contemplate venturing into uncharted waters, you will need all the help and support you can get from those who've gone before you. First I'd recommend taking the course and do just that - all materials from post cards, to video's, logo's web sites, flyers, etc are there so you don't have to reinvent the wheel. The support from those currently doing consulting is worth it's weight in gold.

These are terrific resources. No doubt about that. But they are only the beginning of what we will need as an industry that is about to experience a major paradigm shift. This is clear.

Paula Bean replies: Again, spot on. Reminds me of when buyer agency came into existence, now we have designations and support for that arena. Same thing when we had an agency shift - which is still different in different States. MUCH support is needed when going where one has never gone before.

What I would like to hear, from everyone in the group, is how they see their own needs shaping up. What do you expect to need in the way of support, training, resources, etc. to help you and maybe your associates move into this transition successfully? Are we missing anything? Your input will be valuable.

Paula Bean Replies: I've done consulting for almost 15 yrs, was a BA when it wasn't considered "cool", went through the S&L crisis and now the foreclosure and 'mortgage mess' crisis. I will be glad to share with the group, but I would like to see some imput first from others before adding my own .05 ;-)

I WILL say this though (just as a little teaser) I just listed a 2.5 Million dollar subdivision using consulting.

THAT would not have happened with the traditional commission model because there was not enough equity to do so. Once I sell it to a developer, or perhaps a builder, I'll put a model home on it and make more money doing sales of each home.

I'm also doing short sales and mortgage mods using consulting, which would not happen if I had to charge a commission. This is not to say that I don't have regular commission deals going on, I DO, but having more options gets you more leads and makes you more money.

It is an intriging challenge for me to venture into the unknown, I LOVE change, challenge (and money!) so perhaps this may just spur some conversation and questions.

Paula Bean
Orlando, FL

Jack

JudiB writes:

Jack,

Excellent topic! I think there are some core level issues that also have to be addressed on a state by state basis having to do with licensing laws and restrictions within those individual states. For example, in a couple of states there are very stringent restrictions against anyone other than a licensed appraisal CHARGING for appraisal-like services. Real estate agents are more than welcome to do a CMA for a consumer...just as long as they don't get paid for it!

JudiB,

Have you found any restrictions in Illinois as far as charging for CMA's or anything else?

Thanks JudiB

Lisa Goranson

These are great questions and ideas! Surely we can make a start from there. I will take a stab at some issues that I have seen, and hope others will follow suit:

1. There is no true accounting system that is a custom fit for the unique needs of the real estate consulting office. There are several "add-on" solutions that allow us to perform hourly and multiple level activity billings, but these only go so far. Usually one needs to manually plug the numbers from these systems into their company accounting system as "other revenue" items - a minor mod to the chart of accounts, but still a manual process from there on.

2. There is no thought at the state AOR level that I am aware of that will create new and specific documents (contracts, disclosures, etc.) that take the needs of the real estate consultant and and client into account. We are going to be tacking on addenda for some time to come.

3. Agent education will be paramount. Efforts like the ACRE and the C-CREC programs will likely be more important, but these might have a similar impact to the one the ABR and the NAEBA designations have. Clearly the NAR does not intend to step in and support one or the other, resulting in a certain amount of confusion and disjointedness of those who would practice consulting. We need a champion, for sure.

4. Brokerage Mindset will be critical. Are we going to continue to come up against the traditional practice roadblock (that's the way we always did it) or will brokerages be open-minded enough to allow consulting billings and practices to take hold in their markets?

5. Regulatory support is needed. In Judy's example, we are OK to give a CMA to a client, as long as we don't charge for it. This is a clear reaction to the predicament we are in as a result of the low barrier to entry. States are afraid we are not skilled and educated enough to do the work for a fee. Free is OK.

By the way, here are some really interesting facts to support this low-barrier thinking:

To become a licensed Cosmetologist, a person must pass an examination given by the California Board of Cosmetology. Both a written examination and a practical demonstration of the candidate's ability are required. To qualify for the examination, a candidate must have at least a 10th grade education, 1600 hours of approved cosmetology instruction, and be at least 17 years of age. Training and/or experience gained outside the State may be substituted for most of the 1600 hours requirement. Another, less common, method of qualifying for the State Board examination is working as an apprentice for two years in a beauty salon under the supervision of a licensed Cosmetologist. Three hundred and fifty hours of classroom instruction are also required.

Sixteen Hundred Hours of class time or two years as an apprentice. . . to cut someone's hair!

Now, for real estate:

Successful completion of three college-level courses is required to qualify for a real estate salesperson examination:
1. Real Estate Principles, and
2. Real Estate Practice, and
3. One course from the following list:

o Real Estate Appraisal
o Property Management
o Real Estate Finance
o Real Estate Economics
o Legal Aspects of Real Estate
o Real Estate Office Administration
o General Accounting
o Business Law
o Escrows
o Mortgage Loan Brokering and Lending
o Computer Applications in Real Estate
o Common Interest Developments
Several online course offerings tell us that these can be completed in as little as 6 weeks.

What a disparity! Is it any wonder why the State of California is not convinced real estate licensees can handle such tasks?

How about your state? What is the acceptance of consulting practices there? What will be some of the regulatory barriers?

Jack

Copyright ©, 2008, Jack Harper, All rights reserved

Here - here! Great brainstorming!

I'm sure you've all heard of the old adage "if it walks like a duck, it quacks like a duck, therefore it MUST be a duck", right? Well, not exactly when it comes to consulting in real estate.

It may look like an appraisal, it might look like a BPO, it could look like a FREE CMA, but depending on what state you are in, you can get paid for doing the same thing as long as you don't call it a duck.

This is where we need regulatory statues that span the U.S with NAR and not let each State dictate laws.

If I can do a BPO and ge paid for it (as long as I do NOT call it an appraisal) yet I do the same work, AND call it an appraisal or ??? what is up with that?

ok, I won't call it a CMA, I won't call it an appraisal - I'll call it something else that I can get paid for - a DUCK! Otherwise known as my opinion of what your house will sell for in THIS market within a givin time frame. Jeez - it is all the same, it is just what you call it that matters whether or not you can be paid for doing it.

I call it a Strategic Market Price Opinion (SMPO) As long as I do not call it an appraisal, FL says I'm ok.

Quack, Quack!

In NC, you violate state law if a REALTOR uses the word "Value" in a CMA, Broker Price opinion or the like. This is fact even if you do not charge for your time.

Interesting tidbit... NAR President has appointed a new PAG on Professionalism and Competency. 12 Realtors were selected based on no political connections... just reputation and commitment to their own Professionalism.

A close friend I had lunch with today, one of those appointed, just returned from their first meeting/brainstorming session in Chicago. It is pretty interesting that they removed everything from the table and said nothing is off limits. Things sounded like NAR is truly working on a proposed research and information to report in the future that might even include minimum standards for acceptance into NAR membership.

Sounds like many believe professionalism competency is low and needs to be improved. Unfortunately, the cows are already out of the barn.

Consulting is a new model to most. Change is always hard, seemingly especially for Realtors. Let's continue to go about our best services and view of the future. There is always a price to be leaders. Acceptance is hard until they view results. The price might be; paying an attorney to draft appropriate addenda, contracts and agency agreements more specific for our needs; paying for updates to specific accounting programs... blah blah.

Let the State Association Legal representatives render comments on those addenda or contracts. Our state Assoc. Attorney told me he would review them. Exposure. Push it on them. You are not required to have their blessing.

I also believe an apprenticeship is appropriate... even for some of the old cows. ROFLMAO.

Mr. Bill - On The Outer Banks, NC - www.obxmls.com

Quoting Bill Holt, ACRE, ePRO:

In NC, you violate state law if a REALTOR uses the word "Value" in a CMA, Broker Price opinion or the like. This is fact even if you do not charge for your time.

Great input, Bill.

I suspect we will have many such issues to discover and try to overcome. There are 17 states that have developed Minimum Service regulations. They require agents to provide a minimum service, and clients must live with that. In 8 of these states, consumers can opt out of the minimum service. I guess this was a way to discouraging fee-for-service brokerage. Does it protect the consumer? Nope.

Best

Jack

Copyright ©, 2008, Jack Harper, All rights reserved

Jack -

Illinois is one of those states where "minimum service" has been introduced (at least in the greater Chicago market). I think it was meant to eliminate the "mls only" effort ... rather than discourage fee-for-service. And I definitely support the minimum service requirement we have here. And believe me...the "minimum" they mean is just that! We had a lot of agents who would charge the consumer to put the home in the mls and then disappear...doing absolutely nothing more. The intent of the requirement was that "if you subject a seller to the buyer agent population by entering the property in MLS, you must assist the seller in the contract negotiations" (my paraphrase). Many still do not perform at even that minimum level, and are still around.