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Retainer Fee vs. Straight Commission To Get Paid, What Say You?

By
Real Estate Agent with Keller Williams Realty 0575737

Counting SheepReal estate payments to agents are in the form of straight commissions negotiated with buyers and sellers for the vast majority of business models. But what about

    A Retainer Fee Model Instead?

Some companies are offering up these models as a $ per hour or just pay for the tasks a client needs as an alternative. What do you think about this? In the legal field this is how it works now. You pay for specifically what you need.

I do have my own thoughts on this but I wanted to open it up to YOUR ideas looking toward the future. Would this be disastrous and put more agents out of work, or is this the next 21st century model that is a more smart way to ALWAYS get paid for everything you do?

My graphic kind of leans my way of thinking that a client PAYS YOU FOR THE WHOLE PROCESS so he or she can sleep at night without insomnia and you basically take care of them. The other model requires quite a bit of do it yourselfer from the client.

What do you think with retainer or task per hour fees? The wave of the future or another fad destined to fade?

Comments (22)

Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON
i think it has to be a middle of the ground, retainer and commision combo will work. Especially here in Manhattan New York does quite practice buyer brokerage.
Oct 25, 2011 09:55 AM
Susan Mangigian
RE/MAX Preferred - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

It's an option on our listing contracts now and I see it as a viable option to be put into place if the sellers, after we spend tons of time and money marketing their home, simply decide not to move.  An up front fee that is put toward the total commission at settlement or forfeited if the seller decides not to move.  That's how I see a retainer working.

Oct 25, 2011 09:56 AM
Judith Sinnard
SMARTePLANS; Houston, Texas - Houston, TX
The SMARTePLAN Lady

I agree with Wayne (#2) that the accounting aspect would make this model difficult for most.  I have attorneys, I've seen billable hours invoices and I just cannot see how agents could/would account for their time this way. Also, might that also mean they are going to start providing receipts for expenditures, like marketing expenses. Somehow, I just don't see that happening ...but interesting question for sure.

Oct 25, 2011 09:57 AM
Li Read
Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC
Caring expertise...knowledge for you!

I think we're going to see a blend of both styles...the consumer of the service will decide on the style chosen, so we all need to think about how we will structure the selective service model.   We're not in control of this significant change...the buyer is.

Oct 25, 2011 09:58 AM
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

What you've described is completely different than a retainer fee. I've collected retainer fees, and they're credited to the buyer at closing, IF they close. I only do it when buyers go back and forth about wanting to buy and not buying. It helps show seriousness when they come back and want to look again.

I do not charge a fee for service, and I don't see going that route. Each transaction is so different, and to put a dollar amount to it doesn't make sense.

Oct 25, 2011 10:44 AM
Sharon Lee
Sharon Lee's Virtual Assistance - Jonesborough, TN
Retired and loving life

Interesting pic

Oct 25, 2011 10:49 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Well Gary I think it may vary State by State ..Most agents get paid by the brokerage ...I think we may starve if we do things that way ..... maybe not ..interesting concept

Oct 25, 2011 11:06 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

I've done allot of work on a retainer against hours and expenses, but never on homes!

The problem with homes is that the buyers lack the sophistication to appreciate a true professional. With HGTV and the NAR's adds, and agent's blogs pointing fingers blaming each other, showing agents as clowns it's hard to be perceived as professional.

It would be a better system, but Fannie and Freddy and their cousin Genny are against it!  Home Buyer's Agents will never be true professionals until their clients pay them.

It'll be hard to ask $300.00 an hour when the novice and sale a year guys are asking $20.00 and would be over paid a 1/3 the price.

Harsh? Unfortunately so.

Bill

 

 

Oct 25, 2011 11:15 AM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Gary...I know a fedw companies that tried this, but it did not go over very well and they did not last.

Oct 25, 2011 11:17 AM
Dale Baker
Baker Energy Audits and Commercial Properties Inspections - Claremont, NH
New Hampshire Relocation Real Estate Information

Howdy and evening Gary

Gary, there are a few Buyer Agent Companies here, which charge a retainer fee, that they only keep the fee if the Buyer ends up not buying a home. Some of them even offer folks to pay them a hourly consultant fee to help them with their home buying needs.

Have a good one
Dale in New Hampshire

Oct 25, 2011 12:18 PM
Ann Hayden 636-399-7544
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Des Peres, MO
SelectAnn.com

Gary,

I think a retainer fee to ensure some loyalty when we work hard for a client and someone steals them from us....  They could get the fee back as a credit at closing?

Ann Hayden in Wildwood, MO

Oct 25, 2011 01:15 PM
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

I would take a transaction fee and then rebate at the end. For me, the rest would be an accounting nightmare.

 

 

Oct 25, 2011 02:35 PM
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

Gary, interesting idea that has been debated before.  It would be interesting though to see a new "model" of compensation for reatlors.

Oct 25, 2011 03:43 PM
William Johnson
Retired - La Jolla, CA
Retired

Hi Gary, I attended a seminar on Fee for service plus a flat fee approach. The only real objection I have is proving the service to the satisfaction of the Dept of RE so as not to be confused with the rules associated with Advance Fee. 

Oct 25, 2011 04:36 PM
Gayle Rich-Boxman Fishhawk Lake Real Estate
John L Scott Market Center - Birkenfeld, OR
"Your Local Expert!" 503-739-3843

I  have people hammering me about a lower fee and I ALREADY give them a 1% discount because they live in my community and are my neighbors!  Sheesh! I had that happen today. The seller said, I thought we could negotiate your fee.

Oct 25, 2011 05:26 PM
Brigita McKelvie, Associate Broker
Cindy Stys Equestrian and Country Properties, Ltd. - Lehigh Valley, PA
The Broker with horse sense and no horsing around

Gary,

Each one has it's pros and cons.  I recently had a transaction in which I had both sides.  Worked on it for over 6 months (it had no special conditions) due to the lender dragging their feet.  Everything was in place and the buyer pulled out at the last minute.  Six months of hard work down the tubes and not a penny for it.  It might be a good idea to have a combination of a retainer and commission.

Brigita

Oct 26, 2011 01:31 AM
Connie Goodrich
Keller Williams Realty - McKinney, TX
CRS ABR (McKinney Realtor)Texas

By the hour ... just might take a long, long, time to find that home and research.  I think it opens itself up for criticism from the client about the hours reflected and charge.  At least on the commission you know exactly what to anticipate.  Although your fee arrangement has various choices, as you know in our area the seller generally pays the commission as part of the closing expense making it easier for the buyer's pocketbook.  Good discussion post!

Oct 26, 2011 01:42 AM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor

Gary, I would love to have a model where I could bill for my hours, but I doubt consumers would go for it.

Although many consumers complain about high real estate commissions, the national average Realtor income is only around $34,000.

Oct 26, 2011 04:42 AM
Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

The traditional real estate commission structure is going to change over time.  Too many consumers don't perceive the value of the commission compensation system.  And the system does not "show" the value because it is not transparent.  The closed transactions pay for more than the one transaction - the ones that don't work out have to be covered by the ones that close.  Charging a retainer and fee for service is pretty straight forward in accountant and attorney relationships.  It would equalize the cost of the transactions; the closed transactions would be lower; the incomplete would pay for the services received which is more than currently occurring.  If I had my taxes done and changed acccountants, I would pay each for the work performed.  Providing "free" services paid for by the seller has to stop being a selling point to truly receive payment for one's services.

Mel

Oct 26, 2011 11:38 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

In the past, I've told people I would charge them $500 an hour, and they don't blink an eye. They pay it. People pay what they think you are worth. Personally, I prefer the commission route because I know I'll close it. I don't want to ding around for 500 bucks here and there.

Oct 27, 2011 03:22 AM