Continuing the Thread... Contingency, Deferred or Real Estate Developer?

Melissa, Michelle & Tom -- wow!  That took awhile to thoughtfully review all of your comments.

I have to admit that I am a pretty firm believer in accepting payment at the time services are rendered.  Seems less messy and risky and requires less time to manage.

However, I also see Michelle's point about down the road when a corporation with more financial resources comes along and offers these various financing tools (I will avoid any of the "buzz words" that caused so much disussion here!) and eating up the business.

My BIGGEST concern is exactly what Lynn identified.  If a seller doesn't have the money upfront for Staging, or room on their credit cards, then shouldn't that be a bit of a red flag for us?  Who knows how much money they will actually have at closing?  For Melissa, being an agent gives you MLS access so you at least have a clue about the homes price and market comps, but as Lynn pointed out, there may be many other outstanding debts that come to the closing table and you could be blindsided by then.  Would your qualifying of clients ahead of time uncover enough information to guarantee that this wouldn't happen?  Would you do a credit check on clients, similar to what a mortgage company would do to help ward of some unforeseen debts and liens at closing? How will you guarantee that after commission, potential closing costs, etc that there will be enough equity in the home to pay the Staging fee?  Here is also where pulling a credit check will show the balance of the home loans and therefore give you an idea of the supposed equity.

Furthermore, if you build in a clause that reads "If the home does not sell by __ number of days or months, or if the home is taken off the market, etc then the Staging fee is due in full" -- how can you really expect to receive payment THEN if they didn't have the resources to pay you when the Staging work was implemented? Are they likely to be more financially drained down the road after an unsuccessful crack at selling the joint?

How about offering payment plans as a financing option, with a credit card guarantee on file should problems arise down the road?  For example, if the rental is for a three month minimum, how about letting the client pay each month, one at a time?  If the Stager is going to be a "Real Estate Developer" or whatever name you give it, and be a project manager, then pay upfront for the outsourced services and materials such as painters or handymen, and pay the Stager's consultation/managing fee in chunks each month? Possibly awarding a bonus at closing dependent on how quickly the home sells?

As far as offering payment at closing as a guarantee or incentive that the Stager will do their best to get the house sold quickly, how about accepting payment up front and building in a bonus if the home is successfully sold in ___ # of days.

I wish you ladies the best of luck and please keep us posted of your journey into adding specialty financing options!!! 

Hello Melissa, Yes, you do know how to throw a party.

Alright, I've now read this thing 2x, made notes, slept on it and brooded some... still not sure I have it clear in my mind's eye?  It's a fascinating discussion because it's rife with problems, shaky logic and potential payoff...it's a win big scenario that COULD... MIGHT... WOW,if ---

May I ask some questions, and I apologise if I've misunderstood your musings thus far -

Getting Paid Anyway?  Are you (some of you) expecting to get paid if the home doesn't sell?  I'm not sure that's morally correct.  A line of thought might be: if you want to get paid "realtor money" you need to take "realtor risk".  i.e. there's an entry fee to get in the game (like the realtor having to spend out of pocket, up front, for the marketing) and then you play to win like everyone else.  If you lose, you at least got to play...and you go away, watch the replay, refine strategy and practice until you get another chance to win next time around.

Pure ROI Argument?  How much can you really expect to get given how much you put in vs. the other "investors?"  So you put up $10K worth of stuff on a house that's $750K.  Your piece of that total is 1.3%.  Are you saying that you would be entitled to 1.3% of the net profit or of total sale?  Is there another %?  How much did everyone put in?  The person who bought the property and renovated it?  The realtor marketing it?  You then split something that needs to be universally recognized as profit by the ratio of investment?  How do you account for Time and market appreciation?  Whose entitled to that? 

The Negotiation.  In my region, the negotiation is where the realtor earns their dough.  Negotiations get nasty.  Both sides usually behave badly.  Many deals simply fall apart if the realtor isn't a Class A mediator with UN type negotiating skills.  (In fact the training to be a UN negotiator should be 3 years in NJ real estate!  That plus a few extra languages and you'd rock the whole Peace thing in a matter of months!!  "OK, what's next?  World Hunger?  On it.  Would you prefer Tuesday at 10 or Wednesday at 2?")   Since stagers don't want anyone else staging, you can hardly expect to be allowed in to the negotiation.  However, by this method, you have a vested interest in seeing a good deal materialize...don't you want in?  Don't you want to help make it all work?  For this program to work,you'd have to be really confident in the negotiating skills of the seller's realtor, at the very least, and then there's the deal busting attorneys!  Don't get me STARTED!!!!! (Ye-ah, I'm yelling!  I'm from freakin' Jersey!)

Lastly, Mind the Gap.  When the blood bath draws to a close enough gap, aka the negotiation winds down to $5k apart or whatever the gap is, it is customary around here for the realtors to kick in.  My guess is that the stager would be invited to do the same.  You'd not get another assignment with that realtor if you refused, is my guess. One would therefore need to build in a Gap contribution so that you candemonstrate you're just as much inthe game as everyone else.  They'll come at you with, "which would you rather have - a deal with some money or no deal and your inventory tied up for another couple of months until we get the next one?"  And you know the next one will be lower, it always is, so your slice or % will go down, no?

I think the flat fee strategy will be hard to collect if the deal is a tough one to close.  I can see the % option flying stronger and longer.  However, the take away from this thread for me is the reminder of what Melissa already told me: take credit cards.  Right now, I only take checks and cash.  Which is absurd.  No reason not to let them pay it off over time on a credit card.

I like the % idea.  I'm ve-ry leery of doing it here in my part of New Jersey.  Fear?  You betcha.  Fear grounded on past experience?  For sure.  Fear that could be seen as wisdom, caution and common sense...dunno.  <sigh>  It's always easier NOT to do something, eh?

YIKES...  Use guys just made me realize my tough NJ skin has really thinned since starting my staging business but getting back to in your face and direct ...A contingency doesn't have to be NOT PAID as one suggested (I'm getting a little lost of where we are in the conversation ) but if you write it in the contract you get paid X% of the original listed price, the UN wouldn't be necessary no matter how ugly the negotiations were...

But gotta speak to the South being kinder and gentler in negotiations.  NO WAY...I was on MLS this morning checking out what Sold and closed in the past few days.  Only one of about 30 that closed was for the asking price some were as much as $60,000 less and that was after a price decrease during the listing...

I don't see Southerners as especially being more kind in negotiating than those of us from up there.  As a matter of fact I think we from the North are just direct in the negotiations...saves much wasted time... however many from the South will give  a glass of cool  "sweet tea", a smile and then BAMM.  

Sorry my new Southern friends..not all of you.  But if I told you how many times I heard politely and with a smile:  "Wail ...Mehhh-ay be you should go baack to the No-oth" BUT THEY MEANT EVERY WORD because a Northerner was giving an opinion about their adopted state or city or service they were receiving. 

But I digressed... a little off topic.  I have always accepted credit cards...but that's not filling my pockets and don't forget, you have to pay a fee to accept them.

So since it wasn't credit cards working, I started trying THINGS:

I did the thing that my Inventory, Service and own efforts to market were superior to my competition. As well as highlight that I knew Staging should be a standard with any home sale...In the beginning it was good then...Do you hear crickets?  NOTHING...  I got nothing.

Then I did the risk thing of not getting paid unless the property sold...except for say 30% of what my fee would be and I bragged that I interviewed the agents I worked with to make sure they were going to MARKET the property not just stick some photos on MLS and wait.  Then things started changing and that risk did not pay off and I was seeing bright red numbers with each transaction.** more on that at the end... 

Then I heard, through the grapevine, that a Staging Queen :) a little farther South was doing a package for waaaay less than I was charging ...I couldn't get it worked out on paper but hey it was working for her so I took a stab and tried it...In the beginning it was good.   It was bringing cash flow, not covering all my expenses but I rationalized that I was doing it so my demographic would now understand that staging was the norm and would increase my pricing when the numbers of homes staged grew then...OMG...I started losing jobs to:

FREE!  How do you compete with FREE?  Seems in the good times a plethora (my favorite word gleaned from that ol movie The Three Amigos) of furniture stores opened on just about every corner...  Homes and condos were selling at lightning speed.  I know, I was selling them.  If a building was released for me to sell by my builder, all I had to do was get my list out and call the next 10 people...prepare the contract and Fed-X...SOLD...money in my pocket!  Well they had to furnish the place to rent or flip so they would buy from all those furniture stores...  Seems the furniture stores are having problems too so now they are furnishing homes for FREE to be sold with or at least the possibility of buying from... 

So, where do you go from there?  I don't know...that's why I tried my stab at Christmas in July FREE (well sort of)  but accruing until SOLD.  FREE but could be cheaper than the accrual if you pay month to month...FREE but not really because even if you change your mind you still pay something.

I hope whoever wants to do the:  Free unless it sells reads this because ...  A Realtor should, if they are good, go into a listing knowing up front the % they will spend and will know their bottom line risk to market the property and use their sphere of influence to get it to SOLD...

A stager, however, doesn't have that same luxury.  The cost and risk is usually going to be significantly higher. 

• Interest still accrues on the furnishings if you don't own it outright,
• the cost to move the stuff out once its in there...is also iffy.  You don't know from week to week what it will cost and if like me you charged upfront the rates you were paying seven months prior...UH OH the additional cost came out of my pocket (because I honored my contract) and the cost to me... at least 30% more than when I put the stuff there...
• There's always the possibility of breakage (at least for me who is a klutz by nature anyway) 
• Then...and this happened to me, I had an injury and had to hire someone to do what I use to do to de-stage and on top of that..
• I lost my good dependable help because of the economy and had to hire more expensive and not so great help to remove the stuff...and had breakage.

 RED, RED, RED and more RED...none of my calculations were in the range I thought they would be.

So, what is the answer...hey I'm listening.  I spoke with an authority on the Real Estate market in my area yesterday hoping for answers and help...unfortunately, for me, it wasn't what I wanted to hear and I'm still feeling battered and bruised.  I was told I am doing everything right my business plan was a great model for an economy about three years ago (when I started my staging journey) BUT NOW...  IT'S THE ECONOMY, it is the lack of sophistication in my demographic to understand the value of my service when it's already hard to sell it full, pretty, empty...you name it and I'm paraphrasing here, that Alan Greenspan recently said we are treading on new water in Real Estate NEVER experienced before because of failing banks, sub prime..and more, so no one really knows  where it will end...

I remember gas rationing in the 70's and back in the early 80's I sold a house at 17% interest.  I remember purchasing a house with some creative financing, a 3-2-1 buydown...but how can they get creative now?  Financing got so out of hand that it has gone 20 steps back.  There is a WORLD economy now that is affecting us...  I use to be a glass half full...feeling very much like a glass empty...

I'm done my rant now on Melissas blog...I guess those of us from Jersey are long winded...

Juliet I don't know if even the best of the UN can help some of us...  Sheesh I forgot the UN still existed until you mentioned it...

I am so thrilled to find myself falling under the Southern Belle mystique. That is a first for me, being a transplant from the O.C.

They say, down here, that anyone born North of I-10 is a Yank. Well, the hospital I was born at in Los Angeles just so happened to be about one mile South of that divide (Yes, I-10 bisects La and Orange County, and runs practically into the Pacific Ocean), so a Southern Belle I must be!

That having been said, I would like to address Tom.

Tom, Contingency Staging from a staging corporation is happening in New Orleans, just 90 miles from Lafayette. So who's reality am I to base my business strategy on?

It isn't yours, I assure you.

Timing is everything. The market is Louisiana isn't experiencing the same hit as the rest of the nation:

http://money.cnn.com/2008/05/06/real_estate/100_forecast.moneymag/index.htm

This IS the time for us. This is the perfect time. Awareness of staging has heightened to a tremendous level. There's even several T.V. shows about what we do, it interests people so much. REA's are using the buzzword of staging or tout a staging strategy on their websites, even though many of them admit they don't even KNOW a stager.

We are hot right now. The skittish REA's and Sellers are all looking at what is going on with the nation and revamping their marketing plan of attack. I offer a solution to the fear that their equity will be less than they desrve. And now, I am offering to fill in the loophole, or rather, sink hole, that REA's and homesellers alike perceive, and not with price reductions and vignette or limited or package-deal staging, but with FULL Staging, as it should be. 

I am a believer, a dreamer,and a money-making schemer and all those traits that move things to the next level. Risk is part of the game, and playing it safe will not get me where I want to be. I don't want to pay my bills and have a little nest egg. Been there, and done that. I want to run a big, fat,  lucrative staging business. I can't sit around waiting for a green light from my peers. My gut tells me this is what needs to be done.

I believe in my instincts. As an evolutionary product of my homo sapien ancestors, it is really the only reason I exist. Niggling little thoughts in the back of one person's head might be interesting for cerebral digestion at theirleisure. Mine are my compass, and listening to and following thru with those thoughts might sound ludicrous to some. But as the product of 355 million years of evolution, I trust mine implicitly. You can throw whatever stat you want, whatever article, and whatever anecdotal evidence you've got.

My instinct says these here bushes we are all sitting in are not safe anymore, and that the open meadow is where I need to position myself for survival. Not next year, not by Christmas, but right NOW.

So with the constructive parts of this dialog generated here minus the condescension, to my lawyer I will go. The plan is in forward motion. I will do everything to gear up, except listen to the folks telling me the bushes are still safe.

I know they are not.

~Michelle

This has been a facinating and educational discussion.  As I am not a Staging Queen (yet!!) I think I might also be able to express some of the angst Michele has (big staging corporation)from my even lover level prospective. I love my little business and I don't want to be left in the dust.

Change is a scary thing and maybe many of us out there just starting are concerned about being left on the sidelines.  If everyone else is doing it I have to do it to type thing. 

On the other hand I am looking at this as a possible option just simply because not so many are doing it.  For my business at this point, it would take only one total disaster of the kind Tom has mentioned in his blog comments, to knock me out of the game for good.  On the other hand if luck held out, I did my homework and hooked up with the right REAs, put together a kick --- contract, it could propel me upward and quickly as I think Melissa is hoping when considering ROI and fees.

At this point, I don't yet have the inventory, in house help or revenue to take this plunge but I can see how it could evolve at some point to continue growing like those in Michele's and Melissa's stage.  The big problem for me with all of this,,, bottom line...there is just so much I can control and to me this is in many ways relinquishing control of my business no matter how good a contract you come up with.  As a former practicing Paralegal in Civil Litigation, there is always a loophole to be found somehow somewhere.

Michele,  I do not think you are being foolish, I admire your hutzpah.  You are a true business woman and pioneer as is Melissa.  I wish you all the luck and who knows....we can all plagerize your model (JUST KIDDING)

Melissa AND Tom too, thanks so much for laying this out there for everyone.  I have had to read and reread each of ya'lls blogs to wrap my tiny brain around this stuff and I am better for it.

Hey Melissa...

Trekkies call it Borg Mentality. LOL.

I just think it's our collective instincts kickin' in.

~Michelle

LOL.

Jeri Ryan is just plain hot, no matter WHO you are.

I wish someone would say I looked like her!

~Michelle

Gee, this post got a whole lot shorter than I remember it from the other day..??

OMG I can't believe I made it to the end of all these blogs on getting paid our worth and the 'mechanics' of getting paid. I swear I thought I'd have to continue reading tomorrow...but I just couldn't step away.

LOL, I guess I finished sooner than I thought because some comments were deleted. I was thinking "I'm such a great speed readier"...then Gary burst my inflated bubble by pointing out the missing comments. DRAT.

I've bounced around reading the posts...I'll deferr payment...OMG, no I won't!...Oh, OK...I will! Won't...Will....maybe I'll sleep on it.

Actually I've wanted to do the deferred payments option for some time now and I am *so* glad you started this whole chain of blogs Melissa! I currently do rent the majority of the furniture I use...but I have a plan to avoid being burned until I can acrue enough $$ to purchase all my own inventory.

It was Michelle Molinari's comments...oh so many of them...that has convinced me that I am stupid if I wait a moment longer to get my act together and work this out.

Bookmarked!

Yes, Dane, I can get a little passionate.

I saw my attorney yesterday morning. He is absolutely confident he can cover all the millions if bases I want covered. I will have my new contingency contract in 2-3 weeks.

Thanks to all who helped point out the potholes and shared your ideas, theories, concerns, and validations.

I only have a couple of weeks now to determine our new advertising campaign to announce our new service that will allow  complete real estate stagings for more people who need all their deserved equity!

I cannot thank you all enough!

~Michelle