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2009-02-12 17:40:19

Adapting Your Business to Meet an Evolving Marketplace

 

In my recent book, I write about the need to take the “slow and steady” approach to real estate consulting. By this, I mean to counter those who would have us just abandon our current business models in total favor of what they call “consulting.” I want to go on record as saying that the major shift called for is not going to work for everyone. 

I call this the “traditional bad/ consulting good” mindset in which we are subjected to an endless stream of warnings and predictions of our imminent failure unless and until we become real estate consultants and give up the traditional model. They tell us that our traditional model makes us a “salesman” while the consulting model, by contrast, makes us “trusted advisors.”
 
Well, I don’t know about all that. I know many of my long time associates who are indeed “trusted advisors” to their clients. And they only practice traditional, “contingent fee percentage of sales price” real estate. I also know some who would call themselves “consultants” who are anything but trusted advisors. It is not all about labels, it is all about client choices!
Do we need to adapt to a rapidly changing marketplace? Yes we do. And I suspect we need to accelerate our adaptation. But our traditional business model works quite well for the majority of our clients, does it not? Most consumers are not ready to jump in with both hands on the keyboard and try to make sense of a Zillow valuation of their home, or create stunning web ads for their FSBO’s that will garner them a higher sales price than they would otherwise get through traditional means. Most will still opt for our skills and attention to detail to get them safely to the closing table.
But note that I mentioned that this is most, not all of our clients. Estimates range around the 20% mark for clients who would prefer to work with us on another basis, say bundled services for example. These folks are skilled and willing to get involved in the work of selling and closing a sale, if it will save them some of their hard won equity. That number is likely to go up quickly if sales prices drop any further and erode equity.
These clients are often willing to go elsewhere just to get the type of working relationship that makes sense to them. Allegiance counts, but money counts more in this tough economy. We are possibly losing somewhere around 10 – 20 percent of the business that we could be getting if we just make a small change – add some choices for our clients. This is what I mean by “client choice” real estate:
·         We detail and explain all of the services we usually perform under the “full service” banner
·         We offer the client a scaled down version of these services, usually under a bundle of tasks – like a marketing bundle
·         We advise the client that they can select the bundled option, but it is on a time and material basis – there is no contingency and they will be billed regardless of the outcome (sale or no sale)
·         We allow them to upgrade to another level of service at any point, crediting them what they have already paid against our full service fee
·         We let them choose.
As a matter of practice, we do not lead off with this option. In our practice, we always sit with the client and perform what we call a "Needs Analysis.” During this we identify and explain each of our services, the amount of time we usually spend on them and the skill level required to complete it successfully. For example, mailing our “Just Listed” cards takes much less skill and knowledge than negotiating a sale does.
After we complete the Needs Analysis, the client has a great understanding of our service package – our “value proposition.” We can and we often do stop there and ask for the listing or the purchase agreement. After all, we want to do as much as we can for every client. Sometimes, however, the client will try to negotiate our fees.
Sometimes it is in the form of a question like: “Are your fees negotiable?” Other times they might refer to another agent and tell you that he or she will do it for less. This is an opportunity to underwrite your value, isn’t it? A great response would be to point out all of the services that you provide and tell the client, “If I were to reduce my fees, which of these services do you feel you can do yourself?" Then you can underscore this by adding; “Many agents discount their fees. Perhaps they should. However, when performing all oif these services for a client, I work to the best of my ability and experience. That level of service costs “X” percent."
If the client still persists in wanting to perform some of the tasks for a reduction in fees, you have a genuine consulting opportunity. Rather than let them go to the competition, you might consider adding the option of Client Choice to your value proposition. By adding this approach in small steps, we can enjoy the evolution while bringing additional income into our businesses.
Jack Harper is a longtime REALTOR® and author who is an avid proponent of the consultative model in today's real estate market. He believes in providing fair and professional service and being paid a fair and reasonable fee for those services every time he is engaged by a client, whether there is a sale involved or not. He advocates allowing the consumer to have full choice in terms of the services and is an evangelist for the consulting model. Visit his Online Center for Real Estate Consulting: http://www.ClientChoiceRealty.com  Check out the RealTown Consulting Group for more information and to ask questions.
 

 

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