Entry by Lester Langdon

Strategic Alliance with property management companies ?

  2 Comments

Looking for marketing ideas ?   Let me throw this idea out and get your feedback please.

Property management companies are often the first to know if the owner wants to sell.  Would it make sense to form a strategic alliance with a property management company.  

One challenge is that property management companies also want the high premium commission and often their management agreement says that the owner MUST list the property with the management company. 

However this is not always the case.  Some property management companies do NOT want to also list and sell real estate. 

So what incentive can consultant give to reinforce this strategic alliance??

Normally it was traditionally a referral fee such as 25% of 3%, if it sells.

On a 300,000 property that would be $2,250 for a traditional referral fee, on contingency.

One of my consultant compensation options is to get an up front retainer

which amounts to one fifth of the commission saved.

If my listing agreement is 4.5%, thus saving the seller 1.5% = $4,500.

On the MLS I can advertise to give a buyer broker 2.5% and keep 2%

(yes, I think the buyer agent will take 2.5%, the world has changed)

 

2% of $300,000 = $6,000 to listing broker/consultant.

The start up retainer fee to consultant would be one fifth of $4,500 seller commission saved

= $900 payable to listing broker NOW and credited to seller at closing.

 

Instead of traditional 25% referral fee of $9,000 = $2,250 = ¾ of 1%

Can I promise to give a referral fee ½ of one percent = $1,500

If management company gets half of referral fee now (¼ of one percent = $750)

payable now upon seller signing listing agreement

And ¼ of one percent at closing $750

So management company gets a referral fee hair cut in exchange for getting half their money up front – not on contingency.

 

Consultant gets start up retainer fee = 20% of commission savings $4,500 = $900 credited to seller at closing

$750 of which goes to management company

One could argue that consultant is working on contingency for less money than traditional brokerage

However,

The seller is not going to find another brokerage company if the listing expires

Because the seller has skin in the game with the start up $900 retainer fee

And because the management company will recommend to the seller that they continue to use the same consultant/broker.

Thus at closing the consultant/broker gets the 2% of $300,000 = $6,000

less the credit for prepaid startup retainer fee $900

Take time to think about it.

Lester Langdon

2 Comments

In my area many of the property management companies are run by and/or staffed by agents so they not only manage the properties but they list them & sell them when the owner decides to sell. 

 I'd need to re-check but I believe it is a violation of our regulations to pay any type of referral fee to a non-licensee.

In our Phoenix area we see a lot of buyer agent co-op at 3%, from REO's and traditional sales. We see a lot of 2.5% offered for short sales.

In AZ a referral fee can only be paid to a Broker.

This page contains a single entry by Lester Langdon published on August 5, 2011 6:16 PM.

From the Dept of Justice - Competition and Real Estate was the previous entry in this blog.

Who Moved My Cheese is the next entry in this blog.

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