Entry by Carole Helwig

Need help in finding a "break even" point that makes sense.


I've been using Merv's Smart Plan.  I love it and feel fairly confident in presenting it and making it work. 

In my market, I found that the "break even" point is at about the $300K mark.  That is, where it makes financial sense for the homeowner to get full representation by using either the "shared risk" or "by the hour" options and still get a financial break.  I have adjusted my hourly rate down from what is recommended as a minimum and am a little frustrated that as I meet with more and more property owners in that under $300K bracket, I know that the traditional commission model will be more financially beneficial for them.  With property values declining and Central MA seeing more and more properties under $300K, I'm struggeling to figure out how to address this problem, and feel like I may be a little too close to the trees to see the forrest. 

Surely, there are many markets under that threshold where ACRE's are effectively using the Smart Plan and able to offer the other options.  Can anyone offer me some suggestions on how they are making it work in lower priced markets??

As always, your help and suggestions are greatly appreciated.  Thank you,

"Stuck in MA" (aka Carole) 


There are several issues to consider:

1) Being competitive. Only you know your intrinsic worth but at the same time working in the low end of the market requires you to be competitive with every other traditional agent in your area willing to take listings at the "market rate."

2) I find that the lower end of the market and type of property may not require as many services. So, look at what you are providing and which services may be overkill.

3) Justify a higher rate through demonstration of superior performance and quality of service (also called a value proposition). I love Brent's approach he recently posted. Your higher rate may, in fact, deliver better value for your client.

4) Focus your business in another niche part of the market where you can add real value through superior performance and quality.

There's nothing magic about this. Markets will move up and down and your "break even" point may constantly change. Your ability to justify your value and competitive pricing pressures will always influence your price. No different than any other business.

For example, as we are in this economic recessionary period, many public companies are reporting lower earnings and a reduced sales and earnings expections for the near term future. The companies that are doing better are the ones that have "pricing power" with strong demand for their products and services. I'll use IBM as an example. Their performance is strong and outlook bright mainly due to their "consulting" and services business sector. Their value proposition is to lower the cost of doing business for their clients.

So, how do you justify a higher fee to real estate clients? It may be that your experience, superb marketing skills and demonstrated performance can reduce the time to sell. Time is money to your clients.

Here's another thought from my EDS services business background: As the markets got more competitive, we constantly improved our own processes to be more efficient so that we could maintain and even improve our profit margins. Take a look at where you spend your time and find more efficient ways of performing.

The SmartPlan can actually help. Your out of pocket and overhead costs may not change much. Your estimated fee is not only based on an hourly rate but also time. Look at the time factors and see if there is a way to reduce them by finding new ways of performing. Spending less time lowers your cost and allows you to be more profitable.

I hope this helps get a perspective on your dilemma (a situation demanding a choice between equally undesirable alternatives).


Thank you. Those are great suggestions and they give me food for thought and great material to work with.
I appreciate your insights.

This page contains a single entry by Carole Helwig published on July 29, 2008 8:14 AM.

Competing with FREE was the previous entry in this blog.

Those Misleading Ads Consumer Videos on YouTube is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.