Entry by Karoline Gumble

Looking for Advice on Fees


Got my ACRE designation just days ago and already have 2 consulting appointments but I have a question.  I will be asking for a set amount up front as a non refundable deposit but as for the remaining balance (if they choose a program other than commission) I will be expecting it at settlement or 3 days before they remove their property from the market, but am concerned that makes for an open ended contract since they can keep the property on the market with no intention to sell for months or even years to delay paying the balance of my fee.  Any suggestions on how to overcome this dilemma? Would appreciate any advice on this matter but please help me soon I only have 2 days before I will need these answers. THANKS!


You might consider staggering a couple of payments at intervals (ie, 30 days, 60 days, 90 days after listing) as partial remuneration covering an array of services rendered and final balance due upon closing or, perhaps, cancelling/termination of the listing. In the event they eventually "switch" to commission at closing, any funds already paid COULD be deducted from the total commission due at closing...so they're not paying twice for anything.

State laws vary in this regard, but it helps if you have a clear understanding with the client as to which services each payment is compensation for, and since so much of our marketing, pricing, strategy, etc., is created and developed in the early phases of a listing, that makes good sense.

Good luck with your appointments and GREAT JOB!

Hi Karoline,
Great question and one I wrestled with when starting my Real Estate Consulting business. Here's the conclusion I came to and it worked perfectly. I call it shared risk with the seller. The objective is to get paid for all your work through marketing the property either as an upfront retainer** or in monthly payments (get paid for all the work you do before a contract). Then, agree on a success fee to be paid at closing. Shared risk!

I have concluded about 50% of all work done for a sale is preparing the listing and marketing. So, if a total fee for a listing is $6,000 (for example) the fee through marketing the property would be approximately $3,000.

Now, the next question is why would a seller pay you so much money up front (or over the course of a couple of months)? There must be an incentive ~ a financial one! If I can get paid for my work I discount the total fee for the listing. If I can't get paid for the work, I add a "risk" to my listing fee, making it more expensive.

I'll cover this in more detail in my upcoming webinar. In the meantime, check out this post I made a few years ago: Shared Risk.

**Retainer: Not all jurisdictions allow for an "upfront" retainer without actual work being completed. Be careful.

Just a thought regarding the front fee. The closing company I use has an attorney that works with them and he mentioned that if you call it a 'marketing fee' then it would be ok. It's all about what you call the fee, and an upfront retainer that is non refundable doesn't sit well with a lot of states.

For those of you wondering how to do consulting around the laws in your state, I recommend listening to Merv's presentation on activity based pricing. It works with buyers as well as sellers for those of you who are mainly buyer agents.

Big Kudo's to you Karoline on getting such a great start right out of the Gate! Mollie has a saying from Wayne Gretsky that I like, and it applies to consulting: You will miss 100% of the shots you don't take".

Take a shot, post questions here and learn, then go for it!

Paula Bean
Orlando, FL

Hi Karoline:

I receive money at the time of signing the listing and variously call it an Initial Payment or an Engagement Fee. The client is informed it goes toward (but doesn't necessarily cover) the CMA and other work of setting up the listing and is non-refundable.

Upon attainment of an Unconditional Agreement of Purchase and Sale the balance of my fee is due. Why then? Because my work is done, except for perhaps facilitating a pre-closing walk through.

I avoid making the balance of my fee payable at closing because that inplies that it's sale-contingent. It isn't, it is always a fee for professional services rendered. You'll notice this differs from Merv's success fee arangement described above. Neither is right or wrong, just different from the other.

You are on the right track - keep doing it and refine as you go!

This page contains a single entry by Karoline Gumble published on February 15, 2011 10:07 AM.

The End of 6% and ACRE was the previous entry in this blog.

Activity Based Pricing - A Primer is the next entry in this blog.

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