Entry by Ron Stuart

Want freedom? Try Consulting!

  4 Comments

A recent real life incident taught me a lesson about freedom. Called to a home in an upscale neighbourhood because of a neighbour's recommendation, I met the husband and learned it was a marital separation in which his wife already moved out. Warming to my Consulting Presentation, he said his estranged wife would have to be on side as well and that she had a price in mind that would yield a certain net price. He then proposed that I do the CMA (for a fee of course) before they list the property.

When I returned a few days later to do notes and measurements, he offered to pay my fee. I said it wasn't necessary - he could pay when he received the report, but he prevailed and gave me his $400.00 cheque ( or "check," for American colleagues) on the spot.

Later, sitting down to do the CMA, the estranged wife's "net" number weighed heavily on my mind until I realized, "I am not a salesperson trying to ingratiate myself with a potential client to get a listing; I am a consultant under contract to deliver a professional service in exchange for a fee. My obligations are accuracy and impartiality." I suddenly felt a great sense of freedom! The pressure that normally attends this situation with the tradional model wasn't there. 

The resulting CMA, done using generally accepted appraisal techniques, a consult with a colleague and best practices, produced a estimated market value about $50K less than the wife's "net' number.

The clients have their report, I have my fee and there's reason to believe they will engage me to list the property. Sweet!

How about it ACRES? Want to feel free? Practice consulting!

Ron

4 Comments

Excellent points Ron. Even though agents often dismiss concerns regarding a conflict of interest, the truth is that when our pay is not contingent on a home selling, we can better concentrate on the tasks we were hired to do.

You said it best in your earlier post on renumeration when you stated "The principal flaw, from which most others flow, is a disconnection between the duties and the compensation model of real estate practitioners."

Remember ACREs: Consulting is a mindset, not a fee schedule. It's giving the consumer transparent choices. And having given the consumer the choice of a non-contingent fee, you disarm the consumer from doubting your intentions or your professionalism, no matter how they ultimately choose to pay you.

Mollie - I'm glad you said that - "Consulting is a mindset, not a fee schedule." As you know, that's my primary gripe with a lot of the discussions out there about the consulting model - that it's presented more as a way to be paid than a shift in focus toward the client's needs and away from the "salesperson's" needs.

What's puzzling to me is how pervasive it is in our industry to be tempted to allow a seller to overprice at all, regardless of our compensation structure. I mean, we all know an overpriced listing won't sell; thus resulting in a ZERO payday, so why does the nature of a contingent paycheck factor in?

That's a rhetorical question, of course. I've done it; we've all done it, for various reasons...

Anyway, great post by Ron - and yes - that freedom to actually perform as a professional adviser as opposed to a commissioned salesperson is a wonderful way to work. But I don't think it's necessary to be paid a non-contingent fee to enjoy that freedom, if that makes sense.

I think I understand Jennifer. It's a great freedom to have the tools to offer choices. The majority of Ron's clients choose non-contingent fee. But in my own practice, while I always presented options to everyone I met with, the majority of my clients chose commissions for various reasons.

No matter which way the consumer ultimately goes, there's a tremendous freedom in giving choices. I never got commission-ectomied because if the consumer chose to pay by commission they understood from the get-go that they would pay a premium to have no risk. If the commission was too expensive, the alternative was a non-contingent fee, not cutting my commission. And because of the transparency of offering choices (and being honest about the plusses and minuses of each) I built a relationship with my clients that was one of trust. A much better way of doing business!

The bottom line is that having a consulting practice means providing choices, it's not about how they ultimately choose to pay. Long term, I would like to see commissions go bye-bye because I think they're incompatible with the concept of an objective adviser. However, in the here and now, it's important for ACREs to focus on providing options to the consumer and build your rates, fees and commissions such that no matter what the consumer chooses, you will be fairly paid.

I have been doing fee-based consulting when able, and one of the benefits is that it creates an opportunity to sit and explain the value (and worth) of engaging a real estate professional. However, since the industry still clings to the commission model, there are ways to combine both and still perform a service and be paid for it as well as "co-op" the sale thru the traditional model.

I prefer a less adversarial approach, and I find that frequently all practitioners interested in the consulting model feel they must make am either-or decision. When a practitioner is comfortable in their skill set and knowledge base, it is possible to introduce the fee based consulting in a less threatening way -- let's remember that many people are change-resistant (not just clients/customers, but agents too!).

I long for the day when NAR embraces this as it did ABR & SRES -- I think it would behoove us to work on that aspect.
There's a lot of talent in this group!

This page contains a single entry by Ron Stuart published on February 1, 2011 9:17 AM.

Differing views on remuneration was the previous entry in this blog.

How to Bring Your Broker Aboard is the next entry in this blog.

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