Fee-for-Service Agencies (Agents and Brokers Only, Please) (buyers agent, settlement, commission)

[Eric Young]

Since this forum is called "Real Estate Professionals," perhaps those of us that work in the business can discuss the various viewpoints of Fee-for-Service agencies such as Help-U-Sell and ForSaleByOwner.

[Eric Young]

Can anyone tell me if sellers that use Help-U-Sell or other fee-for-service brokerages can end up paying money even if their house doesn't sell? If so, how much could they be out?

How much do these agencies do in short sale situations? Write hardship letters? Negotiate between banks? How many calls will they make in a day or do they just leave a message once a week?

[mkellam]

Ok Eric: Game on. Real estate is no different than any other industry. There are people who do much, and people who do little. I had a seller today who asked out of his listing after 90 days (I do 120 day listings). I let him go. His wife was giving him grief for listing with Help-U-Sell. What pisses me off more than anything is that it's my fault the home didn't sell. Doesn't matter that the seller wanted to list higher to be able to have "flexibility." Ever hear that one? It doesn't matter what color sign is in the yard. The only thing that matters is the price of the home. No amount of marketing will sell it. I don't care if you work for Remax, Weikert...fill in the blank.
Every one of our offices is independently owned. So. sure someone could charge a seller if he bails on us before the end of the listing. Some offices charge the seller up front $500 and rebate it when the home sells. Big deal, get over it.
Now, to short sales. I have two I'm working right now. And, you're right, a set fee doesn't begin to describe what I have done for these clients to try to save them. But, that being said, whose money are we dealing with here? If I ask bank for a reasonable commission, think they will say no? Again, it goes back to what type of agent are you. One who is out for a commission, or one who cares about the client. That bridges all types of real estate. Get over yourself.

[Eric Young]

Relax, mkellam...I'm looking to understand, not to flame.

Are there charges that your sellers or buyers can incur for which they are obligated to pay whether or not their home sells? It could be a listing fee, or an Open House fee, or a sign fee or a fee for driving someone around.

In the case of a short sale, do your agents always write the hardship letters for the sellers and, if you do, do you charge any non-refundable fees?

I've spent so much time the past two months calling Aurora, the receptionists there know me just by voice...in a short sale situation, do your agents call banks 5, 6, 10, 20 times a day until they get the live human they need or do they just leave a message and wait for a return call?

Perhaps my biggest question is why doesn't your office (or any Help-U-Sell or Assist-to-Sell or ForSaleByOwner brokerage) post your fee schedule on your website? That would be a very pro-consumer thing to do, to let people know how much you'll be charging them for a lock box or for staging advice or whatever, wouldn't it?

I'm just asking.

[Brandon Hoffman]

I have a question...how can low service companies say the save thousands by discounting commission? There is no standard commission so how can it be a discount? Also, discount implies the same thing at a lesser price. If they aren't truly offering the same service it seems this could be a misrepresentation.

Secondly, how can you prove you save thousands when better marketing/ negotiating could actually lead to a higher sales price and faster sale? It's impossible to quantify.

[Eric Young]

Well, there’s my first rep hit for this thread…I do love the comment, though: "What a mean agent." - LOL!

For those that believe in fee-for-service, I say fine…I’m thinking about offering it.

Right now in my town there’s a 21-month inventory. The way it works for a full-service agent is that I absorb all costs for as long as the seller wants it on the market.

I'd love to collect eighty bucks a month from my sellers just to have them on the MLS – that's a guaranteed $1680 for an average listing right now, plus the possibility of a monthly lockbox rental fee, a monthly sign fee, a fee to change the price or wording on the MLS...

In a slow market, the financial risk I take with each listing is significantly greater than in a normal market. Having the seller bear some of that risk in exchange for a reduced fee in the event of a sale may be a prudent business move.

[Eric Young]

Originally Posted by mkellam

I market my homes on a variety of websites, including the "showcase home" feature on realtor.com. I do virtual tours via tourfactory and I advertise on my own site, of course, and in print via the local paper, Homes and Land Magazine, plus I provide brochures for each listing and I use an 800 service for people to call in and receive recorded messages about the home. I pre-qualify every buyer. They call me, not the homeowner. I will meet buyers at a property if the homeowner is not able. After all, not every property works for every buyer. What do you do?

Yes, we know you can do all of these things…but do you charge for each of these things and are your charges all refundable if the house doesn’t sell?

Do all of your listings get the realtor.com showcase or just some of them?

We all run ads in the local paper, but not every house can possibly be getting its own ad with a picture every week…with inventory in my town running 21 months and ads costing $200 just for the weekend, I’d be down $15,120 on each listing. How many ads do you promise before the client has to pay?

When you say that you’ll meet buyers at a property “if the homeowner is not able,” there’s an implication that meeting a buyer is something over and above your normally contracted service – at least that’s how I’m taking it. Is there ever a charge for that?

My intention isn't to be "mean" - I started this thread simply to understand the business model - any help from agents with experience at a fee-for-service brokerage would be appreciated.

[AlicynD]

I know there is a Fee For Service realtor in my area, of course they don't advertise that way. They advertise 1.5%. That's just to put a sign in the front yard, and we know in today's market the sign in the front yard just doesn't cut (not saying that a sale never happens off of it, but...). I heard that for each additional item, the commission goes up either a half a percent or a full percent. I also know that many charge up front fees....say $800. They keep that whether or not the house sells and is still listed with the agent in the end. With my full service real estate company we don't get paid until settlement is completed - no up front charges.

Eric it is a very good question you pose...no offense to fee for service, we're just trying to hear both sides.

[Captain Bill]

I have a fee sheet from one of the companies, but can't find it on my computer yet. If I can't find it, I believe one of my colleagues has it.

On an internet search I did find some info but I don't want to mention the company's name.
The article I read says that its' franchisees typically charge a flat fee of about $2,950 to advertise a home for sale, provide yard sign, advise on the offering price, negotiate with potential buyers and guide the sale through closing.

For an additional fee of around $2,950,the agents for the company will show the home.

For a $200k home that is about as close to 3% for the listing side that one can get. Now add 3% for a buyer commisison and you're at 6%, but apparently haven't added all the services. Someone will correct me if I'm wrong.
According to the company, these fees may vary in different areas.


The list that I have shows additional fees for added services.

The fee shown on my list is also a base fee that increases with the price of the home. I understand that all the fees with the exception of the buyer agent commission is charged up front and is non-refundable.
All of that above is in addition to the 3%, or whatever they choose to pay the buyers agent. This usually does not show up in their advertising.

I have no problem with their business model, but I do have a problem with the way it is advertised.

Here are snippits from one site:

• In the FAQ's they state that they are a "full-service real estate organization". To me, that is misleading because the rest of the sentence is "representing buyers and sellers". So they apparently mean that they are full service in that they represent buyers and sellers. But it can be construed as they offer the same full service that a traditional agent will offer. What do they really mean?

• "We perform all the same services as traditional real estate companies, and, often times, more." That is misleading because they do not perform the same services, unless the client pays more money to get those services. That is clear from reading the first part of the next paragraph.
• " The price you pay is based on a fee for professional services rendered – not on a percentage of the sales price of your home."

The first half of that statement is correct, but the second is not quite correct. As I understand it, and I hope someone will correct me if I'm wrong, but their base fee is based on the price of the home; and the commission paid to the buyer agent is based on a percentage of the sale price of the home.

There is another company that will charge a fee for listing homes on its Web site and in its listings catalogs.


Those prices are about $80 a month for a basic ad to $699 for a deluxe package, which includes a yard sign and listing in the MLS.

Still another model is a pay by the hour at a rate of $100 to $150 per hour. Call to ask a question and the clock starts, just like an attorney. All of this is up front costs whether or not the house sells.


So how much would it cost for an open house? 4 hours plus 1 hour set up time? Is travel time extra, or at a lower rate?


Does one wish to be a full service agent and still offer fee for service? Some are doing that.


Then the questions become:

• How do you unbundle the services?

• How do you keep out of trouble when a client expected more than what they paid for?

• What do you do when they demand a refund because their home didn't sell.

Perhaps the fee for services companies can help with some of those answers.


Bill

[Captain Bill]

If one is contemplating breaking out the services and offering them a la carte, then they should know their state’s laws.


In most cases an agent can fill in the blanks of a real estate contract, and write clauses, addendums, etc. However, if you fill out a contract without performing any other services then you may be practicing law without a license.

Also, think about Agency. If you're just getting paid to do a CMA, then you may want to be extremely careful to not do anything that can be construed as having established an accidental Agency with that "customer".


When Agency is established, the agent has the greatest fiduciary duties, and the greatest liability. With an Agency established, one needs to be compensated much more that just the few hundred dollars for doing a CMA, because of the greater liability.

Check with your broker and your E&O carrier to make sure your plan is covered.


A big problem for traditional agents entering into a fee for service agreement with a customer is when that customer does not completely understand what he's getting. Or later may state that he didn't understand.


So everything must be spelled out very clearly in the written agreement, and explained to the "customer" or "client" so as to be covered in the event the person later decides the agent didn't provide the service they thought they were getting.


I've given a lot of thought to this in the past, and unless my broker were to set up a package that our agents could use in addition to the full service, I wouldn't attempt to get involved with it.


Also, if one does more volume, and the discount model depends on volume then you must be set up in advance to handle the volume. Once you're set up, then you must get the volume, or your expenses will put you out of business in a hurry.



Bill