Entry by Judi Bryan

Competing with FREE

We know this is a topic near and dear to all of you, so we decided to share as much as possible of what we talked about here on the Exchange. Unfortuately, despite repeated attempts, we were unable to record the session. However we tried to make copious notes and hope you're all able to find a useful nugget or two. Enjoy!

Knowing and charging for your value is at the heart of consulting. And even IF you never actually use "by the hour" charging, once you go through the exercise of actually determining your "hourly" rate, you will never, ever look at how you spend your time in the same way. And an additional byproduct of that exercise is that it better prepares you for having honest discussions with consumers about the whole compensation topic! We're being challenged more and more by, not just the internet, but by all sorts of "alternative" business models playing the "who can charge the least" or "How low can you go" game. And when it comes to commission "limbo", no one wins....not the consumer and certainly not the agent. Whether you're talking about seller services or buyer services, like working with buyers without so much as a signed buyer agreement, when we "give away" our time, all we are doing is reducing our value...both in the eyes of the consumer, as well as ourselves.

When asked about what percentage of agents could likely become "real" real estate consultants, Mollie's response is "likely less than 1%....in order to charge for expertise, the agent must have some!"

So let's talk about a number of things....like our challenges, solutions, and some effective dialogues.

So, HOW DO YOU COMPETE AGAINST FREE (the same can be said for CHEAP)

When someone asks "why should I pay you XXX for something that I can get from other agents for FREE", the first thing to pop into your mind is that it's time to STEP BACK and EDUCATE the consumer. When they ask you to "compete" with free, what they are essentially doing is saying you are providing a service that is a "commodity". They are looking at real estate services as though they were a "product"...where every agent's "product" was identical. If that were true, of course it would make perfect sense to shop by price.

I really like a particular pair of socks. I know the brand, the particular style of sock, and all the necessary details of that sock. When I need to get replacements, I know there are lots of stores in my area that carry the identical sock...I know it's identical because the package carries all the particulars right on the label. Since the product is identical, regardless of where I buy it, it makes sense to "comparison shop" to get the best price...because there is absolutely no difference from one package of those socks to the other...other than price!

If you've not already read it, you might want to review the section in Mollie's "Ripping the Roof off Real Estate" book covering "Why Discounting is No Bargain" for some additional insights to share when talking with prospective clients.

Let's pretend that today is your lucky day!!! You just found out you've won the lottery! Who would you want to talk to first (maybe even before tellng your family and friends...LOL!) Wouldn't you want to talk to a tax attorney or an estate planner to help you decide what to do with those founds and how to limit the amount of taxes you'd have to pay on them? And how would you go about picking WHICH tax attorney and estate planner to hire? Would you pick the cheapest, or would you want to hire the best you could find? Would you expect you'd get the identical advice and guidance from every tax or financial planner you talked to? Would all of them have the identical resources to offer you? Would all of them give you the very same "benefit" for their time?
So what's the difference? Why would you choose one over the other? Would you expect the advisors who had the Experience, Knowledge, Resources, etc., that would help you keep the most of your winnings would NOT be the ones offering the biggest "discount" on their services?
The bottom line is that consumers can find a wide range of "real estate service" that falls anywhere between Nordstrom and Kmart (we had some discussion as to whether to change the "Kmart" in this analogy to Walmart instead because Kmart is not doing so well. Frankly, that fact helps to make the end point even stronger! If the agent the consumer hires can't afford to stay in business, how does that help the consumer?)

Here are a couple of quick dialogues:

Consumer asks: How much do you charge??? Response: "I HAVE NO IDEA...WHAT DO YOU WANT?" generally takes them by surprise. And add "Without knowing anything about you or your house, what services you might want or need or how you will be paying for them, I can't really answer that question".
Response: In real estate there's Nordstrom and there's Kmart I only do Nordstrom. But whether you choose a couple of hours of counsel, or particular services, or "the whole enchilada", it's the caliber of service that'll in the end put the most in your pocket. Isn't that what you really want?
It's important to remember THERE IS ALWAYS SOMEONE WHO WILL GO LOWER...who will work a lot of hours, and be willing to not get paid for it. It's the rule of plenty ... and the reality is in such a "contest", there are no winners ... not the consumer, and certainly not the agent!
Susan Gaffney shared that she had just had a buyer agency agreement signed (which is unusual for her area) with a couple of attorneys who were looking for a home in a variety of areas. When she asked them to sign a Buyer Agency Agreement, they said "no one else asks us to sign an agency agreement". So she asked them (remember, these are Attorneys!) if they would take on a client who made no commitment to them...easy answer...they signed!
Randy Carson added in his comments after the call that with the high cost of gas vs. buyers taking more time to reach a decision thanks to high inventory levels and the reduced "sense of urgency", it's more important now than effort to make it clear to them, "If you want my expertise, I must have your commitment that you are going to use me. If you're not willing to sign a contract, I'm not willing to commit my time and expertise." Great going, Randy!!!!
The fact that so many agents in our industry are willing to work without that commitment simply proves that we are not articulating our value. The consumer places no value on our time until WE DO!
Walt Anderson mentioned that, in Minnesota, there are a wide variety of discount companies essentially promoting the "commodity" mentality on listings. However, in his market, agents simply won't work with buyers without agency agreement. As a matter of fact, there is verbiage right in the sales contract that spells out the method whereby the Buyer's Agent fee can be paid out of proceeds at closing. This protects the Buyer's Agent against brokers who are paying a "coop" fee which is less than what the Buyer's Agent is charging. Many of these "discount brokers" will list a house for free, just as long as the seller purchases a house from them.
What the consumer often doesn't recognize is that the expertise as a practitioner makes a big difference in the outcome.
If you were having a root canal done, which dentist would you choose? Would you look for the cheapest? And if not, why not? If each dentist has the same tools available to him, has the same basic educational requirements, what would make you choose one dentist over another?

The real estate industry is in transition. It used to be strictly a sales business where practitioners were charged with moving inventory. Today it's different. The highest value of an agent is not in "finding" a house (or even in finding a buyer). The agent's skill is in knowing what information is relevant for their client, interpreting the information for the client, hammering out the best deal for the client...and then keeping that deal together.

Carole Helwig mentioned she'd seen an article about a doctor who is deliberately reducing his patient load and having the patients he DOES keep in his practice pay him $1500 per year to remain his patient. Since he's not relying on just insurance, he's able to provide more personalized care because he now can afford to do so!

YOU MUST KNOW YOUR DIALOGUE....YOU CAN'T BE WINGING IT!!! After the call, both Carole Helwig and Randy Carson reinforced the benefit of having scripts that we're comfortable using, that help to bring particular points across to the consumer, commenting how really "internalizing" that sort of material can really be a key to success. Carole suggested that it would be helpful to have a section on the Exchange devoted to Scripts and Dialogues where everyone could share examples, stories, anecdotes, etc. that they've found useful so that others could benefit from them as well. (Great suggestion, Carole!) Another of Mollie's comments to clients is

"While any agent can call themselves "consultant"...and many like to because it sounds nice ... what I can do that is different than anyone else is to give you different ways to pay for "Nordstrom", which is ultimately what puts more in your pocket.
"NOTHING GOES OUT THIS DOOR WITHOUT MY NAME ON IT" Cheap will not serve the consumer, and certainly not the agent either! Many will offer it, but it shortchanges everyone. When someone offers "cheap", it's not the "tasks" that get reduced or eliminated ... the access to listings, the flyers & feature sheets, the pictures on the internet. It's the very things that make the most impact on the entire outcome (those essential fiduciary elements) that wind up being sacrificed. It's the benefit of the agent's experience, the hand holding, the interpreting of the information, the knowledge of the marketplace...all of those things and more!
The best trainers in the industry all encourage us to IMMITATE, ASSIMILATE, INNOVATE, and that's certainly true in getting the message out to the consumer (and to our colleagues within the industry as well). Being able to impart to the consumer that there are options for them, what those options are, and how those options can impact their particular situation ... and to do it in a way that the consumer can immediately identify with and understand ... can make all the difference in the world. And for each and every one of us, what we say has to feel "authentic".
Randy brought up the concern about working with 1st time buyers who might not be in a position to pay a "retainer" for an agent's service. The same holds true for the upside down seller. We want to be able to offer to negotiate and troubleshoot for a fee, providing them with a valuable service, but also respecting our own time by requiring a fee.
This really is very similar to asking for an earnest money check (even for buyers who must use "no money down" or minimum down financing alternatives because they really are tight with cash). We describe earnest money as a GOOD FAITH deposit. It's there to let the sellers know the buyer is acting "in good faith" that they will make their very best efforts to complete the transaction. As agents who, from the onset, are thinking, advising, and working in the best interest of the consumers we represent, requiring a similar GOOD FAITH deposit from those consumers also makes perfect sense. It could certainly be structured such that it IS in fact a deposit...a portion of what the agent would ultimately receive in full compensation when a transaction completed (and credited toward that final compensation). And, should no transaction be completed, it would help to compensate the agent for at least some of their time.

As Mollie keeps saying, less is more ... it's not the time you spend, that's important, it's what you do with that time! If you spend five hours printing out flyers, installing signs and keyboxes, uploading content to the web, are those five hours the same as if you spend five hours negotiating contracts? It's the very same number of hours out of your day, but there's a huge difference in the benefit your client receives from those hours.

Several participants joined in to emphasize how anecdotes can help relate the value we have to offer, and do it in ways the consumer understands. The more of these anecdotes we can share with one another, the more likely each of us will be to have some great tools to use in helping to get a particular point across to a prospect or a client.

Simply asking a prospective seller "are you aware of what you're paying for when you pay by commission" can be a huge opener. Most consumers truly don't understand RISK mitigation. It's basic Economics 101 where high risk demands high reward. Agents who discount can only do so by cutting the quantity and/or the quality of their services. And the first casualty on that "service chopping block" is the fiduciary.

JudiB related a recent experience when representing a buyer. The home her buyer ultimately purchased had been listed by a "limited service" broker for a fee of $500. That service had been "limited to" placing a basic listing in MLS, uploading the seller-provided photos to the MLS, and then disappearing. Oh, yes, it was also placed on his personal website where it would help generate buyers that he could then sell other homes to and collect the "normal" range of commissions. When Judi called to schedule a showing appointment, she was told to contact the seller for showing instructions (no keybox, seller drove the hour each way to meet buyer agents and their buyers at the house, and of course conducted the seller's version of a tour through the home). The house had undergone numerous price reductions over the 9 months it had been on the market (the home was beautiful, pristine condition, had a spectacular view and had been originally priced below what should have been market value).

When the buyers decided to make an offer, Judi called the listing agent and was told to negotiate directly with the seller, that the seller would "handle" everything from this point forward. As for the seller's "savings"? Their home took, in all likelihood, 4-6 months longer to sell than it would have had they been appropriately serviced; the house sold roughly 6-8% below where it should have, they were still paying the buyer's broker's side of the transaction. In their efforts to "save" what would have amounted to approximately $8,500, they incurred a NET COST of roughly $25,000 on the house sale itself (NOT INCLUDING bridge costs, carrying costs, travel and miscellaneous other expenses, and the stress of having two mortgages!)

There is a very real difference between the "price" of something, and its ultimate "cost".

9 Comments

After reading JudiB's compilation of the call on Friday, all I can ask is "How much do we all love JudiB?"

Unbelieveable how much time this must have taken her. Rest assured JudiB, that it's a top priority to look into an alternative so you don't have to do this again...

YET, what a valuable post this is! In fact, I think that we should make a part of it a topic on next month's ACRE Alert.

Again, thanks so much JudiB!

Mollie

And I want to thank Randy for his terrific input....his great notes were quite a help to me!!!! And I LOVE Carole's suggestion that we have a section here for Scripts, etc. (Maybe under the Guides section? And for those of you on the call, you'll enjoy hearing that Ms Paula was there too and weighed in afterwards about that Doctor's $1500 annual retention fee!

Thanks for the input everyone...and Yes, it was a GREAT CALL!!!!

Yes, I was there, but had to stay muted the whole time. The neighbors are getting some remodeling work done, and there were other things going on - so nobody would've been able to hear me.

It was a terrific call, and if they decide to have a follow up. You should definitely schedule it in your day.

Judi's copious notes are terrific (and I'm sure very time consuming) but the live interaction is so much better.

I have some idea's for scripts, so when it is decided where they should go, I'll post some.

Looks like a super seminar. Sorry I missed it.

On an organizational note, it occurred to me that there is not a convenient place to categorize notes published after a seminar. The Seminar and Events Topic is treated as something that is scheduled and will show up on the schedule. So, I created a new Topic (or category) under Graduate Forum as the appropriate placeholder. These notes are also filed under Coaches Forum.

If you follow the link from a previous email notice on this subject you will get a Missing Page. Follow the link from this notice to get to the entry and associated comments.

Sorry for the inconvenience but I think it will work better this way.

Sounds like it was a great call. Unfortunately I was out of town and unable to make it.

My .02. I have never had the question "Why should I pay you for something that I can get from other agent's for free?" come up. I'm sure it will at some point, but here are some things I'm doing:

1. Most of my clients come from word of mouth advertising, so previous satisified customers have "set the stage", making my job much easier

2. All of the marketing I do points either to my website, or 24 hour recorded info line. My website, by design, doesn't look anything like a "traditional" Realtors website. There isn't a photo of me anywhere on the site, except on the About Us page. I don't have any listings on my website. It's all about Consulting. My info line talks about the service we offer. I only do consulting. By the time I personally speak with them, they understand that we aren't typical or traditional. (My business card doesn't even have my picture on it)

3. When a potential client contacts me, they almost ALWAYS say "I'd like to meet with you to see what you offer." I NEVER meet with a client until I have a brief phone consultation with them to explain how we work and understand what their situation is. If my service isn't a good fit, then I won't schedule a meeting. Then I advise them that I will need to have them complete a needs analysis before we can meet.

4. When I meet with them, I explain that this won't be a high pressure sales pitch or an attempt to "get the listing", just a review of who we are and how we can help. I briefly explain my business and real estate background and do a high level review of my 15-20 page service proposal, with a strong focus on their situation and what I think they need to do to accomplish the results they're after. I have lots of market info and charts that pertains to them and their situation.

5. I advise them that I limit the number of clients I will work with at any one time to 2-5, depending on the scope of services I'm providing in order to keep my service and quality standards high and give them the personal attention they need.

6. I review their customized Smart Plan, and show them the tremendous savings they will achieve if they decide to use our services. I suggest that they interview a few other agents, if they haven't already, to get a second or third opinion. Selling or buying a house is a big deal. If you need surgery, you want more than one opinion.

Each one is unique, but this is basically how I do it.

Brent

You GO Brent!
Sounds like you have it all under control!
This is, imho, the essence of consulting.

Control of your life, limiting your clients to those you can achieve high satisfaction from (and lots of referrals) as well as transparency to the client and having a happy life yourself.

Keep up the good work!

Paula Bean
Orlando, FL

Brent, thank you for sharing those insights. I visited your website after reading your post and ... WOW! I thought I had some good content on my website, and I still believe I do. And now, it's back the drawing board for me as I work to articulate an improved and more effective message that is more in alignment with my consulting values.
As I was thinking about the work ahead while I continue to drill deeper, I recalled a few phrases from my By Referral Only days ... "Progress, not perfection" and "Open during Remodeling". They will be the mantra in the days/weeks ahead.
Thanks,
Carole

Thanks Carole. A good resource you might want to check out is Gurilla Marketing for Consultants. It's not about or for Real Estate consultants in particular, but consultants in general. One chapter that is helpful is "Beyond Web Sites - Create a Client Centered Web Presence" A few highlights are, and I'm quoting from the book:
"Seven Deadly Sins of Web Site Design - Most consultants web sites suffer from one or more of the following seven deadly afflictions:"
1. Templates and artists
2. Gratuitous images
3. Us/our syndrome (Being consultant focused, not client focused)
4. Splash pages
5. Errors
6. Confusing navigation
7. Poor writing

"...make sure you end up with client-focused sites that include the following sections:"
1. Home
2. Solutions and Results
3. Case studies and testimonials
4. How you work with clients
5. Your story
6. Alliances and affiliations
7. Media center (I need to work on this one)
8. Resource library
9. Terms of use and privacy policy

Brent

still trying to catch up reading posts....WOW...super notes Judi on the teleseminar I was unable to attend. THANK YOU! I can certainly relate to the physician example...because I pay my doctor $1,500 a year to be his patient (MDVIP). And I love getting same day appointments, almost no waiting when I arrive at the office, return phone calls and even email from my doctor himself! I think it's been about 3 years now, and I have no intention of changing physicians! Thanks for sharing that example that I can comfortably use--and thinking about it now, I can compare it to my husband's Medicare supplement insurance (HMO) he pays NOTHING for and the hassles he is subjected to for "free" or almost "free". Good Stuff! Now to check out Brent's website next (it sounds super!!)and thank you, Brent & others for your great comments and advice.

This page contains a single entry by Judi Bryan published on July 28, 2008 9:42 AM.

ACRE on You Tube was the previous entry in this blog.

Need help in finding a "break even" point that makes sense. is the next entry in this blog.

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