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Yes that is how hourly works. I had some FSBO buyer clients pay me $900 in fees and they backed out after the home inspection. Fees were still due.
The people I know who have an hourly fee model charge a retainer fee which has to be refilled weekly as the time is billed. It can also be done bi-weekly or monthly.
...As a person who's profession it is to look out for the well being of their client, how can I possibly bring myself to dumb it down or allow my client to get half my effort when they really need a full effort simply because they don't want to pay me a higher rate of commission. How can I possibly not give it my all and how can anyone possibly want to hire someone who wouldn't give 110% effort....
I have a fee for service model that I purchased from someone a few years ago, which I modified into a 4 tier service level; one model for buyers and one for sellers. But the more I studied the model the more I decided I couldn't use it because of some of the service that was being left out in each case was really services that the client should have.
All of this sounds good on paper, and as long as it's spelled out and explained in detail to the client, and signed, will "probably" protect the agent in the event of a law suit where the client claims the agent was negligent in his duties by not performing some function that was "not being contracted for", which the client later determined they needed, and "thought" they were to receive.
So I've determined that the fee for service is not a model I would use because I would not feel comfortable not providing the highest level of service to my clients.
I've toyed with an hourly fee model, but wouldn't do it unless I had a good hourly rate software program, and a client who understood that the cost per hour could possibly go higher than the percentage fee; and it requires a retainer plus bi-weekly payments. We know that most buyers do not have a clue as to how many hours an agent puts into an average transaction behind the scenes, and that could lead to some disagreements as to the charges.
Clients may not understand why they get charged 20 minutes for a brief email response to their email, or billed for an email to the other agent, title company, loan officer, etc. They won't realize that in order to send an email response to the client, the agent probably had to look in the files, or look up a tax record, call the title company, or do some other type of research to get the answer; and that takes "time".
Just the escrow portion of the transaction can average around 15 hours. Naturally the time in escrow is going higher if there are issues during the due diligence period, title issues, errors on the HUD-1 to correct, or having to deal with unreasonable or incompetent people on the other side of the transaction. And short sales are an even higher burner of time.
More well explained options would certainly make more happy customers. I think the one size fits all model is what generates many of the complaints.
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I disagree. More choices makes consumers more confused and less happy with the choices they ultimately make. A menu of commission choices would be no different.
Real The Paradox of Choice and you will understand why.
From WikiPedia:
Quote:
The Paradox of Choice - Why More Is Less is a 2004 book by American psychologist Barry Schwartz. In the book, Schwartz argues that eliminating consumer choices can greatly reduce anxiety for shoppers. "Autonomy and Freedom of choice are critical to our well being, and choice is critical to freedom and autonomy. Nonetheless, though modern Americans have more choice than any group of people ever has before, and thus, presumably, more freedom and autonomy, we don't seem to be benefiting from it psychologically". —quoted from Ch.5, The Paradox of Choice, 2004
Here is a video where he explains it at a TED conference. Every buyer agent and buyer should watch this. You'll see why buyers who focus on just a few important things, and look at fewer homes, are actually more satisfied with their purchase than buyers who spend 6 months looking at hundreds of homes. Barry Schwartz: The paradox of choice | Video on TED.com
Quote:
Originally Posted by Captain Bill
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So those who would place discount over quality should be happy with the discount agents, whatever their skill levels are. It is difficult to have both because the good agents are not hungry and are willing to "just say no".
Yet no Discount Brokerage dominates any market, becausse consumers largely reject the model. They enjoy increased market share during seller markets, but whither during buyer markets as consumers turn back to full tim, full price, experienced agents.
And yes, the better agents I know, including me, "just say no" to people who want to reinvent the wheel or have us do things differently. Sorry, I just don't need the business of those who don't value what I do and what I charge.
Quote:
Originally Posted by lvoc
...We don't give discounts because we can't charge premiums when it does not go well.
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I agree. As we all know, the easy deals compensate for tthe rough ones, and we never know in advance which one we're entering into. All closings help pay for the uncompensated efforts of non-buyers and busted deals, as well as the general costs of remaining in business and educated about the market.
...I agree. As we all know, the easy deals compensate for tthe rough ones, and we never know in advance which one we're entering into. All closings help pay for the uncompensated efforts of non-buyers and busted deals, as well as the general costs of remaining in business and educated about the market...
Steve
That reminds me of a story I've heard, and it's probably happened in reality many times.
It was in a normal market (not a buyer or sellers market)
A listing agent received an offer on the first day at full price, which the seller accepted. After accepting the offer the seller told the listing agent that he felt they should renegotiate the commission because the listing agent didn't have to do much work or put in much time.
The listing agent said he agreed, they should renegotiate, because he felt that since his marketing brought a qualified full price offer, and the home sold so fast, which saved the seller 6 months of time and carrying costs, (about $2,500/month in this example) that he felt he was entitled to a bonus of 50% of the carrying cost savings.
The seller elected to not renegotiate the listing agreement
I disagree. More choices makes consumers more confused and less happy with the choices they ultimately make. A menu of commission choices would be no different.
Real The Paradox of Choice and you will understand why.
From WikiPedia:
Here is a video where he explains it at a TED conference. Every buyer agent and buyer should watch this. You'll see why buyers who focus on just a few important things, and look at fewer homes, are actually more satisfied with their purchase than buyers who spend 6 months looking at hundreds of homes. Barry Schwartz: The paradox of choice | Video on TED.com
I believe this concept is more commonly known by lay people as "paralysis by analysis." Too much choice for the consumer is NOT a good thing. They get confused or over think it and often elect not to make a decision rather than to make a choice. This is marketing 101.
Quote:
Originally Posted by Captain Bill
That reminds me of a story I've heard, and it's probably happened in reality many times.
It was in a normal market (not a buyer or sellers market)
A listing agent received an offer on the first day at full price, which the seller accepted. After accepting the offer the seller told the listing agent that he felt they should renegotiate the commission because the listing agent didn't have to do much work or put in much time.
The listing agent said he agreed, they should renegotiate, because he felt that since his marketing brought a qualified full price offer, and the home sold so fast, which saved the seller 6 months of time and carrying costs, (about $2,500/month in this example) that he felt he was entitled to a bonus of 50% of the carrying cost savings.
The seller elected to not renegotiate the listing agreement
I believe this concept is more commonly known by lay people as "paralysis by analysis." Too much choice for the consumer is NOT a good thing. They get confused or over think it and often elect not to make a decision rather than to make a choice. This is marketing 101.
I'll have to remember that line.
It's actually different than analysis paralysis. Perhaps the "paradox of choice" is a cousin of analysis paralysis, but there are differences. It's more about how we feel about the choices we make in life, and the satisfaction we get from the outcomes our choices create. You should really watch the video.
For example, iPhones come in black or white. Not much choice there. Talk to a rep at ATT, Verizon and ask how much hand wringing goes on when people need to pick a color of iPhone. Probably not much.
Now imagine a rainbow of color choices for an iPhone. The selection process is much different, and the satisfaction level is decreased because there were so many other choices.
Our happiest buyers, oddly, are those who win multiple offers and pay full price or higher. Why do you suppose that is?
It's actually different than analysis paralysis. Perhaps the "paradox of choice" is a cousin of analysis paralysis, but there are differences. It's more about how we feel about the choices we make in life, and the satisfaction we get from the outcomes our choices create. You should really watch the video.
For example, iPhones come in black or white. Not much choice there. Talk to a rep at ATT, Verizon and ask how much hand wringing goes on when people need to pick a color of iPhone. Probably not much.
Now imagine a rainbow of color choices for an iPhone. The selection process is much different, and the satisfaction level is decreased because there were so many other choices.
Analysis paralysis is more about the consumer's inability to choose when there are too many options. It sounds like paradox of choice is more about customer satisfaction after the decision. I'll have to take a look at that video I guess. They definitely seem to be related though. Either way, too much choice for the consumer rarely ends up as a good thing.
The people I know who have an hourly fee model charge a retainer fee which has to be refilled weekly as the time is billed. It can also be done bi-weekly or monthly.
I don't do retainers for them since I only do a couple a year. I haven't had an issue getting paid.
Analysis paralysis is more about the consumer's inability to choose when there are too many options. It sounds like paradox of choice is more about customer satisfaction after the decision. I'll have to take a look at that video I guess. They definitely seem to be related though. Either way, too much choice for the consumer rarely ends up as a good thing.
I think you all know I offer fee-for-service, hourly and commissions. I agree that you have to limit choices. My fee-for-service isn't an a la carte because that is too overwhelming. My clients get a choice at listing of one flat rate that I have chosen for them or the commission. I haven't done a flat rate in two years. Sellers don't want to take the risk of having to pay for actual value of the service. They'd rather pay more and have the privilege or not paying. I do think that consumers can only handle so many choices. I used to offer more choices and consumers stared at me like a deer in headlights. Streamlined choices is the best.
Bill, I don't leave anything out that I think a client needs for marketing a home, but the commission model has a "business risk fee" built into it. All you do with flat rates is pull the business risk out. 50% upfront (the retainer) the rest at closing. If you don't close it is due within 30 days of termination/expiration. Only crazy people that want to go out of business do flat rates and don't require payment or some sort.
In my hometown, the median home price is well above $600K. The average commission paid out by a seller in this town is likely somewhere in the neighborhood of $32K (total which is split between agents).
Lawd, our median price is around 150k so the average commission paid at closing is around 9k on a 6% commission. I carry 25-30 listings on average and if I had to be at each showing I wouldn't make it long because our market covers a large area. If I were to be at each showing I'd probably have to charge twice as much to cover my lost time to be at showings. What the OP is is suggesting just isn't practical and dare I say counterproductive? Listing agents or sellers being present during the showing are a big turn off to buyers and buyer agents here and that doesn't even touch on the scheduling nightmare.
Besides, with the rare exception of a high end custom home wth would the listing agent accomplish by being there? See this large master bedroom? Isn't it great? Oh, don't worry about that hot pink paint-we'll get it painted.
Seriously, nobody likes a pushy salesmen and that's what you'd get a lot from listing agents being present.
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