By Glenn Freezman
If you were to talk to a financial adviser, one of the foundational tenets that they would share with you when discussing your investments is the need to diversify your portfolio. Simply put, don't put all your eggs in one basket. And yet, most people who earn a living rely on a single source of income for their livelihood.
Like with investing, the primary challenge of having a single stream of income is that if there is a market shift or you run into simple old-fashioned bad luck, then it's game over. But for people who have figured out how to bring money into different channels at the same time such hardships have a lot less impact.
Now, I'm not suggesting that you run out and find a second job or a second career to occupy those few hours you aren't currently working or sleeping. However, as a Realtor you are perfectly positioned to be able to create new financial opportunities for yourself (and your brokerage) by thinking innovatively about how you can provide additional services to your home buying clients.
Let's first agree that the people that you work with every day have diverse needs and expectations. In short, they're not all the same people. Let's also assume that offering a single payment option (straight commission based upon the selling price of a home) may not address all home-buyer’s needs.
As you've no doubt noticed homebuyers are getting more and more savvy about the home buying process. They understand how to use the Internet and other resources to locate, research, virtually tour, and do their basic due diligence when it comes to finding new properties. As a result, many homebuyers feel that since they're taking on part of the task of buying the home they shouldn't have to pay full price for the services of their Realtor. It's worth pointing out that very few homebuyers would question the value of the services and experience that Realtors offer when it comes from getting from contract to close.
So how does a Realtor offer their home buying clients a better deal that takes into consideration the home-buyer’s willingness to take on some of the responsibilities themselves while leaving other tasks to their agent? The answer is in the creation of alternative compensation agreements.
Alternative compensation agreements are just that -- an opportunity for a homebuyer and a Realtor to work together using a payment method that is not tied into straight commission.
Let's say that instead of getting paid by the seller's broker for your part assisting homebuyers that instead the homebuyers agreed to pay you directly for your time and services based on either an hourly basis or by the tasks you perform on their behalf. In exchange, the money that had been earmarked for a commission payment would be put on the table and offered it to the homebuyers at closing for their participation. This means that homebuyers not only have a further incentive to close but it also means that as an agent you have a guaranteed payday based on the work that you perform that is in no way tied to a closing contingency. This means that you will get paid no matter what happens.
Considering that the average Realtor only closes one out of every four agreements that cross their desk (according to statistics from the National Association of Realtors) this can mean an awful lot of "wait and see" being tied to your payday. Wouldn't it be great to have some guaranteed cash flow alongside your contingency pay from time to time?
It's worth pointing out that alternative compensation agreements are not designed to meet the needs of all buyers. Some buyers were to want the full treatment and will be perfectly happy to fore-go the commission in exchange for that service. But for homebuyers who wish to participate in the home buying process more closely, being able to offer them an alternative will not only help you stand out from the crowd but will also give them a better sense of the value that they bring to the process, allow you to get paid for your valuable time and allow them to save money in the process.
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